Why Index Your Bonds?

What is a bond ETF?

A bond ETF is a portfolio of bonds that trades on an exchange like a stock. Today, investors of all types — from sophisticated institutions, financial advisors, and personal investors — are investing with bond ETFs because they make investing in bonds easy and simple.

Capital at risk. All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed.

Why index your bonds?
Key features of bond ETFs

Bond ETFs offer many of the same potential benefits as equity ETFs, but in a new asset class.
Choice
Choice
Index funds enable a variety of broad and targeted exposures
Diversification
Diversification
Instant access to fixed income markets on demand, tapping into thousands of bonds in a single trade
Value
Value
A comprehensive set of cost effective funds with transparent pricing
Transparency
Transparency
Rules-based vehicles offering a clear understanding of the composition and risk characteristics of their exposures

What can bond ETFs do for you?

Diversify your equities

Diversify your equities

Seek to add stability to your equity allocation with bond ETFs that cover the broad market.

Pursue more income

Pursue more income

Seek a higher level of income with high yield bonds, emerging market debt, or preferred stocks.

Put your cash to work

Put your cash to work

Try to earn a little more from your cash with short duration bond ETFs.

Want to know more about bond ETFs?

Hear from Vasiliki Pachatouridi, Product Strategist within BlackRock's Fixed Income Portfolio Management group, as she looks at the merits of fixed income investing.

Debunking 7 myths on Fixed Income indexing and ETFs

Capital at risk. All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment.

  • Truth 1: The largest weights in fixed income indices tend to be large, blue chip companies similar to equity indices.

  • Truth 2: Index funds are managed by portfolio managers that have a more flexible investment process than the benchmark they track. This process allows them to avoid forced buying or selling situations and enables them to participate in the new issue market.

  • Truth 3: Typically, index funds have had lower turnover than both their underlying index and the active managers in their category.

  • Truth 4: An investor can use multiple indexed investments, such as ETFs, to build custom portfolios that can meet their unique investment needs.

  • Truth 5: ETFs have shown to replicated the risk and return characteristics of their benchmarks across a diverse set of fixed income sectors.

  • Truth 6: Beliefs that indexing is creating inefficiently priced markets are overblown as index investments account for only about 2% of the market.

  • Truth 7: Many active funds rely on investments in higher risk sectors to outperform a benchmark in upward trending markets, which can reverse when markets are downward trending.

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