What can bond ETFs do for you?

A money market fund or deposit account may help protect the nominal value of your cash, but you may be missing out on a chance to keep up with inflation and grow it with interest from bonds.1

Seek a return from your cash with bond ETFs

Today, most bank accounts offer a minimal amount of interest. Even bank certificate of deposits (CDs) and money market funds don’t typically provide enough yield to keep up with inflation. That means that the purchasing power of your cash can diminish as inflation eats away at it over time.

Short duration bond ETFs can potentially add more income while helping you step out of cash and meet short- or long-term investment goals.

Average yield for cash, cash alternatives and
short duration bond ETFs

Chart: Average yield for cash equivalents and short duration bond ETFs

Source: Bloomberg, Morningstar, FDIC, BlackRock, as of 6/30/21. “Money Market Fund” represents 2a7 Money Market Funds and is calculated using the Weighted Average 7-Day Yield of the Morningstar “Money Market – Taxable” Category. “Savings Account” and “12 Month Bank CD” are the average APY rate of all FDIC-insured savings and 12-month bank CDs. iShares and BlackRock ETF yields represent the 30-Day SEC Yield. An investment in fixed income funds is not equivalent to and involves risks not associated with an investment in cash. This information must be accompanied by a prospectus. The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.iShares.com or www.blackrock.com. For standardized performance, please click here.

It's important to note that short duration bond ETFs typically carry a higher degree of risk than money market funds and should not always be used as substitutes. Money market funds typically seek to maintain a net asset value of $1.00 per share. iShares and BlackRock ETFs do not have a similar objective.

Ways to invest excess cash

There’s no one-size fits all solution. For many, it helps to think of your cash in layers, and segment it based on how soon you will need to use it. Try segmenting your cash into short, medium and longer-term needs.

For instance, a segment can be cash that you need as soon as 0-3 months, 3-6 months, in the next 6-18 months, or 18 months and beyond. As a general rule, the sooner you will need to use each segment of your cash, the less risk you may want to take on with an investment.

Cash that will go unused immediately may be able to earn more interest for you now. The table below outlines a hypothetical cash segmentation framework.

Cash Segmentation Strategy Sample

Time Horizon Immediate-term
(Less than 3 months)
(3-6 months)
(6-18 months)
(18+ months)
Typical Use Immediate day to day expenses Short-term expenses and emergency funds Larger future purchases or unexpected expenses Longer-term savings
Cash Objective Capital preservation and daily access Stability with incremental income Incremental income with low risk Generate income or growth with some risk
Investment Type Short duration treasury market exposure Ultra-short duration bonds and cash alternatives Ultra-short duration bonds Short duration bonds

For illustrative purposes only.