In addition to AGG there are other ETFs that can serve as temporary exposure vehicles, here are some that we have had questions on recently:
- For a short maturity option, we have seen interest in the iShares Short Maturity Bond ETF (NEAR). Short maturity funds are especially useful for transitions as they generally have less interest rate risk than most other fixed income funds. For this reason we see them used by investors transitioning between short maturity portfolios, and also by investors just looking to reduce market risk during their transition.
- For investors seeking exposure to high yield corporate bonds, we suggest the iShares High Yield Corporate Bond ETF (HYG). Using ETFS as transition vehicles in a market like high yield is especially valuable because it can be so expensive to trade that bond market directly. HYG also offers a 1 basis point spread.*
Whatever your current strategy, ETFs can provide you with extra time as you make adjustments to your portfolio, and help you make the right decisions with your investments. And you never know, along the way you may find that the liquidity and precision benefits of the ETF make it a valuable part of your portfolio for the long term.
*Blackrock, NYSE Arca, from 8/1/2014-8/30/2014.
Matthew Tucker, CFA, is the iShares Head of Fixed Income Strategy and a regular contributor to The Blog. You can find more of his posts here.