Bond Laddering ETFs
Building a bond ladder is a popular risk management technique that looks especially useful right now. It’s all about owning fixed-income securities with staggered maturities with the purpose of limiting interest rate risk. It also allows advisors to redeploy the capital invested in expiring bonds into higher yielding issues or elsewhere.
The Invesco BulletShares ETF series offers corporate, municipal and high yield bonds with maturities from 2022 to 2030.
For example, the Invesco BulletShares 2022 Corporate Bond ETF (BSCM) owns bonds that mature this year. On or around December 15, 2022, the fund will terminate its existence by returning capital to shareholders. Laddering with bond ETFs avoids the risk of single bonds while helping clients to safely navigate the trend of higher interest rates.
Summary
Entrenched views about investing in bonds haven’t worked during the current cycle. Instead of being overtaken by market turmoil, advisors can uses it as an opportunity to re-educate clients about the benefits of new and alternative bond investing strategies.