Proprietary Data Insights Financial Pros’ Top Bond ETF Searches in the Last Month
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Financial Pros Top 5 Bond ETFs
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Bonds are back, baby! With 1-year yields over 5%, investors are perfectly happy stashing their cash in ‘risk-free’ Treasuries. With the Fed poised to cut rates next year, the principal value of these holdings could skyrocket. Since most folks aren’t interested in holding individual bonds, ETFs are a natural fit. With dozens to choose from, we looked to our TrackStar data to come up with the top searches by financial pros. At the head of the pack was iShares 20+ Year Treasury Bond ETF (TLT). It’s one of the most popular and liquid bond ETFs out there. But before you add it to your portfolio, here’s what you need to know. Key Facts About TLT
Bonds are debt instruments issued by companies and governments. U.S. government Treasuries are considered ‘risk-free’ since we’ve never defaulted on our debt, and if we did…well, you’d have bigger problems to worry about. Bond prices and yields are inversely correlated. So, as the price of bonds increases, yields decrease. Hence, lower rates from the Fed mean higher bond prices. Generally, the longer a bond has until maturity, the higher the interest rate. However, that’s not always the case as treasuries with <1 Year maturity yield over 5.0% while 30-year Treasuries yield around 4.5%. Additionally, prices for longer-dated bonds are often more volatile than shorter-dated ones. The TLT is an ETF comprised of U.S. Treasury Bonds with 20 years or more left until maturity. Performance Bonds took a hit as the Fed began to raise interest rates. Until then, they had performed extremely well on a risk adjusted basis.
However, the low-rate environment meant bonds paid very little. Today, the higher yields have attracted retirees and conservative investors looking for regular income. Competition As we mentioned earlier, you can own bonds across different maturities and from different entities. Below is a list of several high-quality ETFs:
Our Opinion 10/10 We believe the outlook for long-term bonds is better than short-term based on expectations for a Fed rate cut. However, that makes this ETF more of a stock-like investment than one for yield. If you want high yield, money-market funds are great, paying close to 5%. |
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