Consequently, fixed-income ETFs usually adjust to the current yield environment. Bond ETFs have an innate bond laddering strategy built within the funds. The fund, like individual investors, would hold securities with differing maturity dates, and when the bonds mature, it uses the returns to reinvest at current rates.
“Whether you choose an individual bond or a fixed income ETF, your investment will be impacted by rate changes,” Tucker added. “Understanding that impact is an important step in deciding which vehicle is right for you.”
For more information on bond funds, visit our bond ETFs category.
Max Chen contributed to this article.