“Though bond yields have been rising, individual investors have now reduced their exposure to fixed-income assets for three consecutive months,” wrote Charles Wrotblut, a “Forbes Intelligent Investing” contributor. “The perception of yields remaining low on an absolute basis and expectations for a further decline in bond prices (and little upside) are causing many individual investors to eschew bonds or otherwise limit their exposure to them.”
Related: Financial Advisors’ ETF Investment Trends in Today’s Environment
ETFs Still Saw Value, Short Duration Inflows
As volatility rained down on the markets in October, investors were seeking refuge in value ETFs–in particular, the iShares Russell 1000 Value ETF (NYSEArca: IWD). IWD saw an influx of investor capital worth $423 million, making it the second largest weekly inflow in 2018 and the most since July.
For allocations into fixed-income ETFs, most have flocked to short duration, especially with short-term rate adjustments being instituted by the Federal Reserve, investors can limit exposure to long-term debt issues and focus on maturity profiles. As a result, shorter durations are in favor on the fixed-income front to prevent prolonged exposure to a bond market that’s seen its fair share of rising Treasury yields as of late.
Examples of bond ETFs with short duration exposure include the SPDR Portfolio Short Term Corp Bd ETF (NYSEArca: SPSB), which seeks to provide investment results that correspond to the performance of the Bloomberg Barclays U.S. 1-3 Year Corporate Bond Index. Another option is the iShares 1-3 Year Credit Bond ETF (NASDAQ: CSJ), which tracks the investment results of the Bloomberg Barclays U.S. 1-3 Year Credit Bond Index, which includes debt that has a remaining maturity of greater than one year and less than or equal to three years.
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