What's the Appeal of Short-Term Bond ETFs? | ETF Trends

Are you considering an investing approach to play it safe-particularly with bond focused exchange traded funds (ETFs)?

Index Universe reports that over the past year and a half, the world’s credit crisis has spread to stocks, and a number of options have come to market for ETF investors. Those looking for short-term bond ETFs can now find several different portfolios to choose from. They’re an attractive tool for investors who simply want to stay on the short side of the duration curve in order to avoid the threat of rising interest rates.

While there is not a lot of history or back-testing available for most of these ETFs, with less than a year of trading under their belts, there are other in-depth perspectives to take on them and see if they work for your portfolio or investment objectives.

  • iShares Barclays 1-3 Year Treasury Bond Fund (SHY): This fund is the oldest, launching in July 2002. The portfolio consists entirely of Treasury notes and had more than 40 holdings at the end of 2008. The expense ratio is 0.15%, and was up 6.6% in 2008.

  • Vanguard Short-Term Bond Fund (BSV): This is the largest fund in the category. It holds a mix of government, corporate and international-dollar denominated debt. Government or agency debt is nearly 70% of the portfolio. Its expense ratio is 0.11%.

  • Claymore US Capital Markets Micro-Term Fixed Income ETF (ULQ): Launched in February 2008 and covers money market and micro-term fixed-income securities. The expense ratio is 0.27%.

  • PowerShares Active Low Duration Fund (PLK): The portfolio consists mainly of U.S. government, corporate and agency debt and has 21 holdings. Its expense ratio is 0.29% and tends to pay out higher interest rates.

  • WisdomTree U.S. Current Income Fund (USY): Invests primarily in short-term, investment-grade debt, and charges a 0.25% expense ratio.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.