As the U.S. braces for a rising interest rate environment, exchange traded fund (ETF) investors may adopt a bond ladder strategy to hedge against the risks through maturity- or target-date ETF options.

With the Fed intent on hiking rates ahead, investors can implement a bond laddering strategy through defined-maturity bond funds to hedge their fixed-income positions.

Related: ETFs 101: What is a Bond ETF?

These defined-maturity bond funds typically buy bonds that mature in the year the ETF will terminate, ensuring that investors can collect the bonds’ face value at maturity, along with a steady income stream along the way. As such, investors are meant to buy-and-hold these securities until maturity. In contrast, a regular bond ETF runs the risk of losing its original principal if interest rates go up, depending on the bond ETF’s effective duration, since the typical bond funds would buy and sell debt securities to maintain their target short-, intermediate- or long-duration strategy.

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While financial advisors and investors have implemented this strategy through targeted debt securities, crating bond ladders with individual bonds can be time consuming and cost prohibitive. Alternative, investors can utilize target-date bond ETFs to easily create a bond ladder strategy.

Using target-date bond funds, an investor could create a bond ladder strategy in a portfolio with varying maturity dates. The bonds’ maturity dates are evenly spaced across several years so that the proceeds from maturing bonds may be reinvested at regular intervals.

Guggenheim BulletShares ETFs:

  • Guggenheim BulletShares 2016 High Yield Corporate Bond ETF (NYSEArca: BSJG)
  • Guggenheim BulletShares 2017 High Yield Corporate Bond ETF (NYSEArca: BSJH)
  • Guggenheim BulletShares 2018 High Yield Corporate Bond ETF (NYSEArca: BSJI)
  • Guggenheim BulletShares 2019 High Yield Corporate Bond ETF (NYSEArca: BSJJ)
  • Guggenheim BulletShares 2020 High Yield Corporate Bond ETF (NYSEArca: BSJK)
  • Guggenheim BulletShares 2021 High Yield Corporate Bond ETF (NYSEArca: BSJL)
  • Guggenheim BulletShares 2022 High Yield Corporate Bond ETF (NYSEArca: BSJM)
  • Guggenheim BulletShares 2023 High Yield Corporate Bond ETF (NYSEArca: BSJN)
  • Guggenheim BulletShares 2016 Corporate Bond ETF (NYSEArca: BSCG)
  • Guggenheim BulletShares 2017 Corporate Bond ETF (NYSEArca: BSCH)
  • Guggenheim BulletShares 2018 Corporate Bond ETF (NYSEArca: BSCI)
  • Guggenheim BulletShares 2019 Corporate Bond ETF (NYSEArca: BSCJ)
  • Guggenheim BulletShares 2020 Corporate Bond ETF (NYSEArca: BSCK)
  • Guggenheim BulletShares 2021 Corporate Bond ETF (NYSEArca: BSCL)
  • Guggenheim BulletShares 2022 Corporate Bond ETF (NYSEArca: BSCM)
  • Guggenheim BulletShares 2023 Corporate Bond ETF (NYSEArca: BSCN)
  • Guggenheim BulletShares 2024 Corporate Bond ETF (NYSEArca: BSCO)
  • Guggenheim BulletShares 2025 Corporate Bond ETF (NYSEArca: BSCP)

iShares iBonds ETFs:

  • iShares iBonds Dec 2016 Term Corporate ETF (NYSEArca: IBDF)
  • iShares iBond Dec 2017 Term Corporate ETF (NYSEArca: IBDJ)
  • iShares iBonds Mar 2018 Term Corporate ETF (NYSEArca: IBDB)
  • iShares iBonds Dec 2018 Term Corporate ETF (NYSEArca: IBDH)
  • iShares iBond Dec 2019 Term Corporate ETF (NYSEArca: IBDK)
  • iShares iBond Mar 2020 Term Corporate ETF (NYSEArca: IBDC)
  • iShares iBond Dec 2020 Term Corporate ETF (NYSEArca: IBDL)
  • iShares iBond Dec 2021 Term Corporate ETF (NYSEArca: IBDM)
  • iShares iBond Dec 2022 Term Corporate ETF (NYSEArca: IBDN)
  • iShares iBond Mar 2023 Term Corporate ETF (NYSEArca: IBDD)
  • iShares iBond Dec 2023 Term Corporate ETF (NYSEArca: IBDO)
  • iShares iBond Dec 2024 Term Corporate ETF (NYSEArca: IBDP)
  • iShares iBond Dec 2025 Term Corporate ETF (NYSEArca: IBDQ)
  • iShares iBond Mar 2018 Term Corporate ex-Financials ETF (NYSEArca: IBCC)
  • iShares iBond Mar 2020 Term Corporate ex-Financials ETF (NYSEArca: IBCD)
  • iShares iBond Mar 2023 Term Corporate ex-Financials ETF (NYSEArca: IBCE)
  • iShares iBonds Sep 2016 Term Muni Bond ETF (NYSEArca: IBME)
  • iShares iBonds Sep 2017 Term Muni Bond ETF (NYSEArca: IBMF)
  • iShares iBonds Sep 2018 Term Muni Bond ETF (NYSEArca: IBMG)
  • iShares iBonds Sep 2019 Term Muni Bond ETF (NYSEArca: IBMH)
  • iShares iBonds Sep 2020 Term Muni Bond ETF (NYSEArca: IBMI)
  • iShares iBonds Dec 2021 Term Muni Bond ETF (NYSEArca: IBMJ)
  • iShares iBonds Dec 2022 Term Muni Bond ETF (NYSEArca: IBMK)

For more information on the fixed-income market, visit our bond ETFs category.

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