With ETFs, the average retail investor can also potentially enhance returns through corporate debt exposure at a lower cost. Bosse argues that investors can get a cheaper version of the risk and return of active managers by pairing an Aggregate Index fund with a low-cost corporate bond index fund.
For instance, the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD), iShares Intermediate Credit Bond ETF (NYSEArca: CIU) and Vanguard Intermediate-Term Corporate Bond ETF (NYSEArca: VCIT) all provide exposure to investment-grade quality corporate debt. [Bond ETFs for Income Generation While Hedging Rate Risks]
LQD has a 0.15% expense ratio and a 3.10% 30-day SEC yield. CIU has a 0.20% expense ratio and a 2.03% 30-day SEC yield. VCIT has a 0.12% expense ratio and a 3.08% 30-day SEC yield.
There are 282 U.S.-listed bond ETFs on the market with an average expense ratio of 0.41%, according to XTF data. Boccellari points out that the low fees are also a good way for income-minded investors to keep more of the yields for themselves, as opposed to forking over a 1% fee for active managers.
For more information on the fixed-income market, visit our bond ETFs category.
Max Chen contributed to this article.