Invesco’s BulletShares ETFs offer a bond-like experience in an ETF wrapper, bringing numerous benefits.
BulletShares ETFs are a suite of fixed-term ETFs that enable investors to build customized portfolios tailored to specific maturity profiles, risk preferences, and investment goals. Similar to individual bonds, BulletShares ETFs offer the potential for monthly income and a cash distribution at the fund’s expected termination. BulletShares can be used for various investment strategies, including potential rising interest rate protection, bond laddering, and lifestyle-driven planning.
In the current environment, in which rates are rising quickly, investors are best sticking to shorter duration fixed income products. In general, the higher the duration, the more a bond’s price will drop as interest rates rise, and the greater the interest rate risk, according to Investopedia.
As investors look to move into shorter-duration products, the Invesco BulletShares 2023 Corporate Bond ETF (BSCN) has surged in popularity. The fund has taken in $169 million in net inflows over four weeks and $412 million year to date, according to VettaFi.
BSCN is trailed by the Invesco BulletShares 2026 Corporate Bond ETF (BSCQ), the Invesco BulletShares 2024 Corporate Bond ETF (BSCO), and the Invesco BulletShares 2025 Corporate Bond ETF (BSCP), which have seen inflows of $101 million, $86 million, and $69 million, respectively, over four weeks.
The primary advantages of using BulletShares as opposed to individual bonds are diversification and flexibility offered by the fund suite.
Bond portfolios tend to require a higher number of securities to maintain ideal diversification, which can be fairly cumbersome and time-consuming to trade, according to Invesco. BulletShares can act as a huge timesaver for advisors, and typically add diversification to a bond laddering portfolio that would otherwise be using individual bonds.
The flexibility component comes down to the scalability of the fund suite across a range of client accounts. Large clients and small clients can now achieve the exact same investment exposure at the exact same cost, something that’s very difficult to achieve using individual bonds, according to Invesco.
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