By moving down the yield curve, short-duration bond ETFs will experience smaller swings in a rising rate environment. For instance, a 1% rise in interest rates would only correspond to modest, if any, losses for ETFs like SHY. With an expense ratio of just 0.15%, SHY is a cost-effective option for the fixed income investor looking to fight the scourge of rising rates. [Bond ETFs on the Cheap]
“The fund’s costs are competitive with other exchange-traded funds, but considering that the yield to maturity on the portfolio is 0.59%, expenses swallow about a fourth of the portfolio’s income. This fund has done an excellent job tracking its index. It has an estimated holding cost of only 0.12%,” according to Morningstar.
Investors have warmed to the SHY story, pouring over $1 billion into the fund this year. Enthusiasm for the ETF has accelerated in the current quarter as more than $1.4 billion has flowed into the fund since April 1.
iShares 1-3 Year Treasury Bond ETF
