As markets have cycled out of the growth and momentum-fueled investments of 2018, a move to more quality-oriented investments are in order for 2019. Identifying these quality-based investments, however, will require more due diligence.
That same strategy rings true when it comes to fixed income exchange-traded funds (ETFs). With a more dovish Federal Reserve and fears of slowing global growth, headwinds for bond markets warrant a more strategic approach.
Nonetheless, the trend thus far has been an influx of capital for bond funds–whether of the mutual fund or ETF variety.
“Even with the roaring start to 2019 that has the S&P 500 Index up nearly 16% through Thursday, an increased appetite for fixed-income strategies suggests the emergence of a more conservative mindset among investors,” wrote Jeff Benjamin of InvestmentNews.
Benjamin also mentioned that during “March alone, taxable bond funds had $35.3 billion worth of net inflows and municipal bond funds had $8.8 billion in net flows.”
The end of 2018 also spurred a move to bonds as investors sought after safe-haven alternatives amid the volatility. One corner of the bond market that especially saw an influx of capital was short duration bonds.
For investors looking to shore up their bond portfolios with fixed income ETFs focusing on short duration, here are the 10 biggest via ETFdb:
|Symbol||ETF Name||Total Assets ($MM)|
|VCSH||Vanguard Short-Term Corporate Bond ETF||$23,700.99|
|IGSB||iShares Short-Term Corporate Bond ETF||$11,205.61|
|CSJ||iShares 1-3 Year Credit Bond ETF||$10,483.64|
|SPSB||SPDR Portfolio Short Term Corporate Bond ETF||$5,164.16|
|SCPB||SPDR Barclays Capital Short Term Corporate Bond ETF||$3,164.66|
|GSY||Invesco Ultra Short Duration ETF||$2,348.09|
|BSCK||Invesco BulletShares 2020 Corporate Bond ETF||$1,759.52|
|BSCL||Invesco BulletShares 2021 Corporate Bond ETF||$1,504.76|
|IBDL||iShares iBonds Dec 2020 Corporate ETF||$1,122.51|
|IBDM||iShares iBonds Dec 2021 Corporate ETF||$1,113.95|
The default bond play to get broad-based exposure might be the iShares Core US Aggregate Bond ETF (NYSEArca: AGG), which tracks the investment results of the Bloomberg Barclays U.S. Aggregate Bond Index. The AGG gives bond investors general exposure to the fixed income markets, but there are times when current market conditions warrant a deconstruction of the AGG to extract maximum investor benefit.
“The broader theme here is that we’re deep into a bull market and we might be seeing some financial advisers and institutional investors de-risking portfolios,” said Morningstar analyst Kevin McDevitt.
Other opportunities might be debt overseas. As the U.S. capital markets make their way out of the late cycle, it can be opportunities overseas that can be more attractive alternatives.
For more trends, visit ETF Trends.