Bond ETF

Published Aug 4, 2023

Definition of Bond ETF

A Bond ETF (Exchange Traded Fund) is a type of investment fund that invests in a portfolio of bonds. That means it is a collection of bonds that are traded on a stock exchange. Bond ETFs are similar to mutual funds in that they provide investors with diversified exposure to the bond market. However, unlike mutual funds, Bond ETFs are traded on the stock exchange and can be bought and sold throughout the day.

Example

To illustrate this, let’s look at the iShares Core U.S. Aggregate Bond ETF (AGG). This ETF invests in a portfolio of U.S. government, corporate, and mortgage-backed bonds. It has a total of over 8,000 bonds in its portfolio and is one of the most popular bond ETFs on the market.

Investors can buy and sell shares of this ETF on the stock exchange just like any other stock. That means they can buy and sell shares of the ETF throughout the day and benefit from the price movements of the underlying bonds.

Why Bond ETFs Matter

Bond ETFs are a great way for investors to gain exposure to the bond market without having to buy individual bonds. They provide investors with diversified exposure to the bond market and allow them to benefit from the price movements of the underlying bonds.

In addition, they are also more liquid than individual bonds, which makes them easier to buy and sell. As a result, Bond ETFs are becoming increasingly popular among investors who want to gain exposure to the bond market without having to buy individual bonds.