With the uncertainty of further rate hikes in 2019, especially if Fed Chair Jerome Powell delivers a dovish press conference following the decision, here are three ETFs to consider of the short duration variety.
With the short-term rate adjustments being instituted by the Fed, investors can limit exposure to long-term debt issues and focus on maturity profiles. An example would be SPSB, which seeks to provide investment results that correspond to the performance of the Bloomberg Barclays U.S. 1-3 Year Corporate Bond Index.
SPSB invests at least 80 percent of its total assets in securities designed to measure the performance of the short-termed U.S. corporate bond market. Ideally, shorter-term bond issues with maturities of three to four years are ideal to minimize duration exposure should the bull market enter another correction phase.
VCSH tracks the performance of the Bloomberg Barclays U.S. 1-5 Year Corporate Bond Index–a market-weighted corporate bond index with a short-term dollar-weighted average maturity. In addition to VCSH allocating capital towards debt issues that are investment-grade, fixed-income investors will like the reduced exposure to duration with maturities between one and five years.
Another short-term bond ETF option is the iShares Short-Term Corporate Bond ETF (NasdaqGM: IGSB), which seeks to track the investment results of an index composed of U.S. dollar-denominated investment-grade corporate bonds with remaining maturities between one and five years. IGSB provides investors with exposure to short-term U.S. investment grade corporate bonds.
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