Additionally, the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD) focuses on investment-grade corporate debt. The fund shows a 7.76 year duration and a 3.07% 30-day SEC yield. The iShares Intermediate Credit Bond ETF (NYSEArca: CIU) tracks high-quality corporate and non-corporate bonds with credit ratings BBB and above. The ETF has an effective duration of 4.25 years and a 1.98% 30-day SEC yield.
These types of high-quality, intermediate assets act as an insurance policy. Many have thought about shifting toward shorter term bonds, but if an investor is heavy on equities and short-term bonds, your overall portfolio is susceptible to short-term volatility and potential spikes in safe-haven demand. Consequently, Jacobson advises investors to keep some intermediate positions.
“The one time that you are really going to need it, if it’s not there, everything is going to go down at the same time,” Jacobson added.
For more information on investing with ETFs, visit our ETF 101 category.
Max Chen contributed to this article. Tom Lydon’s clients own shares of LQD.