How Defined Maturity ETFs Help Fixed Income Investors

In contrast, a regular bond ETF runs the risk of losing its original principal if interest rates go up, depending on the bond ETF’s effective duration, since the typical bond funds would buy and sell debt securities to maintain their target short-, intermediate- or long-duration strategy.

“Traditional bond ETFs usually sell bonds well before their final maturity dates and reinvest those proceeds into other bonds. But defined maturity ETFs invest in a variety of bonds that all mature within a defined window of time. At the end of that window, proceeds are returned to investors, who can either spend them or reinvest them into longer-dated funds as rates increase,” according to Invesco.

Recent additions to the BulletShares suite include the BulletShares 2028 Corporate Bond ETF (NYSEArca: BSCS) and BulletShares 2026 High Yield Corporate Bond ETF (NYSEArca: BSJQ).

For more on bond funds and strategies, please visit our fixed income channel.