Credit spread is the difference in yield between bonds of similar maturity but with different credit quality.
Credit risk is the risk of default on a debt that may arise from a borrower failing to make required payments.
Smart beta represents an alternative and selection index-based methodology that seeks to outperform a benchmark or reduce portfolio risk, or both, in active or passive vehicles. Smart beta funds may underperform cap-weighted benchmarks and increase portfolio risk.
The BofA Merrill Lynch US High Yield Index tracks the performance of US dollar-denominated, below-investment-grade corporate debt publicly issued in the US domestic market.
The S&P 500® Materials Index comprises those companies included in the S&P 500 that are classified as members of the GICS® materials sector.
The RAFI Bonds US High Yield 1–10 Index is comprised of US dollar-denominated bonds which are SEC-registered and whose issuers are public companies listed on a major US stock exchange. Only investible, non-convertible, non-exchangeable, non-zero, fixed coupon high yield corporate bonds qualify for inclusion in the index. No foreign agencies, governments or supra-nationals are allowed.
There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. The Fund’s return may not match the return of the Underlying Index. The Fund is subject to certain other risks. Please see the current prospectus for more information regarding the risk associated with an investment in the Fund.
Fixed-income investments are subject to credit risk of the issuer and the effects of changing interest rates. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. An issuer may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating. Junk bonds involve a greater risk of default or price changes due to changes in the issuer’s credit quality. The values of junk bonds fluctuate more than those of high quality bonds and can decline significantly over short time periods. Due to anticipated Federal Reserve Board policy changes, there is a risk that interest rates will rise in the near future.
Investments focused in a particular industry are subject to greater risk, and are more greatly impacted by market volatility, than more diversified investments.