Corporate bond ETFs offer diversification through a pool of hundreds of bonds that allow investors to diversify risk, liquidity or the ability for intraday electronic trading, transparency through published daily holdings, income on monthly interest and lower costs than comparable mutual funds.
Furthermore, few bond mutual funds have outperformed over the long run. About 41% of bond Mutual fund managers have outperformed in the past five years, 33% outperformed over the past decade and only 25% beat their benchmarks over the past 15 years.
Looking ahead, 50.2% of all financial advisors plan to increase their usage of bond ETFs over the next three years, compared to 22.7% indicating they want to increase individual bond usage and 18.0% in bond mutual funds, according to a Cerulli Associates survey.
“Bond ETFs, and ETFs in general, are often more cost effective than bond mutual funds. New regulatory rules coming out could also increase the appeal of bond ETFs,” Hyman said.
Financial advisors who are interested in learning more about bond related strategies can watch the webcast here on demand.