As 2019 comes to a close, it’s going to be another banner year for bonds, which have moved higher along with stocks thanks to an uncertain economic backdrop that saw investors pile heavily into bonds, especially during the summer.
“As 2019 begins to draw to a close, investors are looking at how their investment portfolios have performed,” wrote Dan Caplinger in Motely Fool. “For the most part, stock investors have to be pleased with how the year has gone, with returns of close to 25% for the S&P 500 and many individual stocks having shown even bigger gains.”
“Yet what’s surprising is that in a year in which stocks are performing well, the bond market has also managed to produce solid returns,” Caplinger added. “As you can see below from the year-to-date returns of various iShares bond ETFs, those who invested their money in Treasury bonds with longer maturities got rewarded handsomely, while even investors who opted for lower-risk short-term Treasuries still managed to see gains for the year.”
Investors who have stuck with the common 60-40 portfolio mix, 60% stocks and 40% bonds, have been reaping the rewards of the duality in gains for both asset classes.
“As investors look at 2020, many believe that 2019’s strong returns for bonds aren’t likely to repeat. Yet the bond market has defied calls for an imminent implosion for years, and those who’ve stuck with an asset allocation model that includes both stocks and bonds have been richly rewarded.
Opting for Quality Debt
When playing in the fixed income exchange-traded fund (ETF) market, it’s best for investors to opt for quality debt. Investment-grade corporate bond-focused fixed-income ETF options include the iShares Intermediate Credit Bond ETF (NASDAQ: CIU), iShares iBoxx $ Investment Grade Corp Bd ETF (NYSEArca: LQD) and Vanguard Interm-Term Corp Bd ETF (NASDAQ: VCIT).
Investors looking for broad-based core bond exposure can look to a fund like the iShares Core US Aggregate Bond ETF (NYSEArca: AGG). What’s under the hood of this ETF that gives investors the much-needed core bond exposure, especially in today’s volatile market?
- AGG 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.
Investors looking to gain broad-based exposure to bonds can look at funds like the ProShares S&P 500 Bond ETF (NYSEArca: SPXB). The fund seeks investment results that track the performance of the S&P 500®/MarketAxess Investment Grade Corporate Bond Index, which consists exclusively of investment-grade bonds issued by companies in the S&P 500.
For more market trends, visit ETF Trends.