Fixed income exchange traded funds are on torrid asset-gathering paces this year, indicating advisors and investors still love bonds despite low U.S. interest rates. The iShares Core Total USD Bond Market Index (NasdaqGM: IUSB) is an example of an ETF benefiting from that theme.
IUSB seeks to track the investment results of the Bloomberg Barclays U.S. Universal Index. The fund generally will invest at least 90% of its assets in the component securities of the underlying index and may invest up to 10% of its assets in certain futures, options and swap contracts, cash and cash equivalents, including shares of money market funds advised by BFA or its affiliates, as well as in securities not included in the underlying index, but which BFA believes will help the fund track the underlying index.
IUSB essentially takes the AGG and adds a dose of nitrous oxide to its engine, adding more yield to the mixture.
IUSB charges just 0.06% per year, or $6 on a $10,000 investment, making it one of the least expensive bond ETFs. With nearly 8,900 holdings, it’s also one of the largest.
“This passively managed portfolio provides exposure across the entire credit spectrum,” notes Morningstar’s Susan Dziubinski.
Interested in iShares’ IUSB?
The fixed income market was one of the stars in a pandemic-ridden 2020, especially when the Federal Reserve came in to backstop bonds earlier this year when the COVID-19 sell-offs were at their peak. As ETF investors look to position their portfolios for 2021, getting bond exposure is still a must.
On duration, IUSB is a medium-term fund. The fund’s credit risk is minimal as over 60% of its holdings are rated AAA, making the iShares ETF ideal for risk-averse income investors.
“Because the portfolio is market-cap-weighted, it includes significant exposure to the highest-quality bonds, which makes the fund a little more vulnerable to interest-rate movements than other intermediate-term bond choices,” according to Morningstar.
Gold-rated IUSB has a 30-day SEC yield of 1.47%.
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