Investors can tailor their exposure to corporate debt with specialized bond ETFs. Defined-maturity ETFs can help investors customize their fixed-income portfolios.
“Defined-maturity ETFs have been embraced by advisors who are building laddered portfolios, require income to support their client’s life-style, or are seeking to meet certain client’s life goal needs,” Guggenheim Investments Managing Director, Portfolio Strategist Tony Davidow, said in an interview. [A Guide to Target-Date ETFs]
For instance, the defined-maturity ETFs provide predictable income through monthly distributions. Additionally, upon maturity, the investors would receive principal.
“Defined-maturity ETFs are ideal tools for laddering bond portfolios,” Davidow said. “Because of the finite maturities, advisors can use multiple defined maturity ETFs to spread their risk, and stagger their maturities.”
Given today’s historical low yield rates, long-term investors have to be wary about potential interest rate risks in the future.