The current market environment is conducive to equities, but that doesn’t mean bond exposure should be expunged from your portfolio.
First, why still get bond exposure? As a Financial Times article put it:
“Returns over the horizon may be harder to achieve, but bonds will still play a very important role in portfolios. Indeed, the traditional benefits of bonds — diversification and a moderation of portfolio volatility — could be especially beneficial in the years ahead. The global economy is likely to see a bumpy recovery and broader shifts that could create much greater volatility than the market has experienced over the past decade.”
Investors not wanting to pay a premium can turn to low-cost bond ETFs like these three iShares ETFs:
- iShares 0-3 Month Treasury Bond ETF (SGOV) — 0.03% Expense Ratio: SGOV seeks to track the investment results of the ICE 0-3 Month US Treasury Securities Index. The fund generally will invest at least 90% of its assets in the component securities of the underlying index and may invest up to 10% of its assets in certain futures, options and swap contracts, cash and cash equivalents. The index is measures the performance of public obligations of the U.S. Treasury that have a remaining maturity of less than or equal to three months.
- iShares Core U.S. Aggregate Bond ETF (AGG) — 0.04% Expense Ratio: AGG has been the go-to fund for investors who want core bond exposure. With the AGGY, investors still get the core elements of AGG, but with a twist of yield. Overall, the fund seeks to track the investment results of the Bloomberg Barclays U.S. Aggregate Bond Index. The index measures the performance of the total U.S. investment-grade bond market. The fund generally invests at least 90% of its net assets in component securities of its underlying index and in investments that have economic characteristics that are substantially identical to the economic characteristics of the component securities of its underlying index.
- iShares 0-5 Year TIPS Bond ETF (STIP) — 0.05% Expense Ratio: STIP to track the investment results of the Bloomberg Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Years Index (Series-L). The fund generally will invest at least 90% of its assets in the component securities of the underlying index and may invest up to 10% of its assets in certain futures, options and swap contracts, cash and cash equivalents. The index measures the performance of the inflation-protected public obligations of the U.S. Treasury, commonly known as “TIPS,” that have a remaining maturity of less than five years.
For more news and information, visit the Equity ETF Channel.
