Mar 11, 2021
Simple math matters: When interest rates are near historic lows, bond fund fees can eat into take-home returns.
Source: BlackRock, Bloomberg and Morningstar as of 12/31/2021. Benchmark yield represented by the yield to worst on the Bloomberg US Aggregate Bond Index.
Falling bond yields
Source: BlackRock, Bloomberg, US Federal Reserve as of 03/31/2022. Core bond yields represented by the yield to worst on the Bloomberg US Aggregate Bond Index. Fed Funds represented by the Federal Funds Target Rate-Lower Bound. Past performance is not indicative of future results.
One way for professional and do-it-yourself investors to help ensure they maximize income is to own funds with low management fees. Index-tracking bond exchange traded funds (ETFs) have become a popular way to invest in bonds, in part because they generally cost less than their active mutual fund peers.
Consider that the iShares Core U.S. Aggregate Bond ETF (AGG) has an expense ratio of 0.03% compared to the category average for mutual funds at 0.59%.2
The upshot is that bond ETFs, which iShares pioneered almost two decades ago3, offer exposure to precise parts of the bond market and enable investors to build efficient portfolios at a low cost.
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iShares unlocks opportunity across markets to meet the evolving needs of investors. With more than twenty years of experience and a global line-up of 900+ ETFs, iShares continues to drive progress for the financial industry. iShares funds are powered by the expert portfolio and risk management of BlackRock.
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1 U.S. Department of the Treasury, real yield on 10-year U.S. Treasury bonds is -0.52% (as of December 31, 2021); the nominal yield on 10-year U.S. Treasury bonds is 1.52% (as of December 31, 2020).
2 Source: BlackRock and Morningstar. As of March 31, 2022.
3 iShares launched the first bond ETFs in July 2002 (LQD, SHY, IEF, and TLT).
Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses, which may be obtained by visiting the iShares Fund and BlackRock Fund prospectus pages. Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal.
Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments.
Investment comparisons are for illustrative purposes only. To better understand the similarities and differences between investments, including investment objectives, risks, fees and expenses, it is important to read the products' prospectuses.
The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective.
The information presented does not take into consideration commissions, tax implications, or other transactions costs, which may significantly affect the economic consequences of a given strategy or investment decision.
This material contains general information only and does not take into account an individual's financial circumstances. This information should not be relied upon as a primary basis for an investment decision. Rather, an assessment should be made as to whether the information is appropriate in individual circumstances and consideration should be given to talking to a financial professional before making an investment decision.
Transactions in shares of ETFs may result in brokerage commissions and will generate tax consequences. All regulated investment companies are obliged to distribute portfolio gains to shareholders.
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