Category Archives: Bonds

Bond ETFs and its advantages

The Bond ETF is a type of Exchange Traded Fund. Here the investment is made in bonds (like government treasury bonds) withdrawing the money from the shares, especially in times of recession.

Price transparency and liquidity are two most important advantages of Bond ETFs. The historical or current prices of the Bond ETFs are accessible by any investor. Investing in bond ETFs are much cheaper and easier than the bond mutual funds. You can have access to a number of bonds by putting up just $5-$10,000. In Bond ETFs there is a diversified portfolio including government, corporate, municipal, real return, short, medium or long maturity and also international types. Thus, you get a lot of options for investments.

The greatest merit of the Bond ETFs is that it offers protection from continuous change of interest rates. Thus they involve lesser risk. The holders of Bond ETFs get both monthly dividends (in cases of bond interests) and also annual ones on the capital gains.

Bond investments for the retail investor

Finance, Investments, Investor,Bond investments are quite old too. Yes, the equity market offers greater returns but then it is highly volatile and the drawdown can be just as high. It means you are open to big losses as well in case you playing on high leverages. At the same time, bond options are more or less hedged and thus they provide strong investment options. Yes, the returns are lower but the strength of investment makes up for the lack of ROI.

Retailers understand that a bond is a way of earning via a debt issue to a borrowing company. Bonds are secure and only way they can crash is if the company seeks liquidation or bankruptcy. Often the zero-coupon bonds provide no money during the tenure of a loan and only provide the principal along with profit at the end of the bond tenure. Bonds lack transparency and they have got far lesser footage from media. This explains why they are not that popular an option amidst retailers.