Bond funds also diversify your interest rate risk. Most bond funds own bonds that mature at different times in the future, meaning if interest rates rise, the rate on your bond fund will also rise.
The cost of some bond ETFs can be a deal-breaker when yields are low, as they are now. Many bond ETFs charge a 1% expense ratio, which can become expensive.
When you buy a bond ETF, you are invested in shares. If the share price rises and falls, so does your investment. And while they’re less volatile than stocks, there’s no guarantee you’ll get your initial investment back when you sell shares.
For more stories about bonds, visit our bond category.
Tisha Guerrero contributed to this article.