6 Best-Performing Bond ETFs for December 2024
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Bond exchange-traded funds, also known as bond ETFs, offer an easy and affordable way to diversify your financial portfolio, create a source of income and reduce volatility.
What is a bond ETF?
Bond ETFs exclusively track and trade bonds, bond indexes or other fixed-income investments in various categories. When you buy a bond ETF, you're purchasing a share of the fund and receiving a portion of that fund's returns.
Need to back up? Read our primer on ETFs
Best bond ETFs by one-year performance
Here are the best-performing U.S. bond ETFs ranked by one-year performance. This list excludes actively managed and leveraged ETFs, as these tend to have higher expense ratios and risk profiles.
Ticker | Company | Performance (Year) |
|---|---|---|
GOLY | Strategy Shares Gold-Hedged Bond ETF | 22.83% |
ICVT | iShares Convertible Bond ETF | 20.62% |
CWB | SPDR Bloomberg Convertible Securities ETF | 19.87% |
XHYC | BondBloxx USD High Yield Bond Consumer Cyclicals Sector ETF | 9.81% |
XHYH | BondBloxx USD High Yield Bond Healthcare Sector ETF | 8.31% |
ELQD | iShares ESG Advanced Investment Grade Corporate Bond ETF | 7.63% |
Source: Finviz. Data is current as of market close market close Nov. 29, 2024, and is intended for informational purposes only, not for trading purposes.
Remember, when researching a bond ETF, you'll want to also investigate its liquidity, maturity and tradability in addition to the interest rate it offers. Read more about these characteristics below.
Advantages of bond ETFs
ETFs are touted for a simple reason: easy and affordable diversification. Building out your portfolio by individually picking stocks or bonds can be risky and expensive. For instance, while a single U.S. Treasury bond sells for $100, a single municipal bond can cost a minimum of $5,000.
The minimum investment for a bond ETF, in contrast, is the share price, which can be much more affordable. For instance, on July 17, 2024, a single share of the First Trust Municipal High Income ETF, or FMHI, was $48.83. In other words, for under $50, you could buy a share of FMHI and instantly be invested in a wide spectrum of U.S. municipal bonds.
Bond ETFs can be purchased through most online brokers and may contain hundreds of bonds, instantly spreading your risk across many investments. Here are some other essential characteristics of bond ETFs:
Liquidity: Bond ETFs are liquid, meaning they can be bought or sold at any time without negatively impacting the price. On the other hand, individual bonds vary in how easily they can be bought and sold. Long-term treasuries, for example, are attractive for their high yields. However, they can also be less liquid than a bond ETF if you were to try and sell in a pinch.
Maturity: Bond ETFs maintain constant maturity. In contrast, individual bonds mature on a specific date. Since a bond ETF is a "basket" of bonds that mature at various dates, the bond ETF calculates prices by using the average maturity at any given point in time.
Tradability: Bond ETFs are easily tradable through any brokerage account that offers them. Some individual bonds have more complex sale processes.
How to buy bond ETFs
Ready to get started? Try the following three steps:
First, if you don’t already have a brokerage account, view NerdWallet's picks for the best brokers for ETFs to find the right one for you.
Compare ETFs using free screening tools (often available through your brokerage account).
Weigh characteristics such as expense ratios, volume, holdings, performance and trading prices.
Once you’ve found an ETF, place a trade.
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