6 Best-Performing Bond ETFs for September 2023
Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.
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. Here’s what you need to know.
Bond ETF definition
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.
Biggest bond ETFs
Here are bond ETFs ranked by five-year performance. 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.
Ticker | Fund name | Five-year return |
|---|---|---|
ICVT | iShares Convertible Bond ETF | 8.77% |
BSCN | Invesco BulletShares 2023 Corporate Bond ETF | 8.31% |
CWB | SPDR Bloomberg Convertible Securities ETF | 8.27% |
FALN | iShares Fallen Angels USD Bond ETF | 4.22% |
FLHY | Franklin High Yield Corporate ETF | 4.06% |
BSJP | Invesco BulletShares 2025 High Yield Corporate Bond ETF | 4.05% |
Source: VettaFi. Data is current as of market close on August 31, 2023 and is for informational purposes only.
NerdWallet rating 5.0 /5 | NerdWallet rating 4.7 /5 | NerdWallet rating 5.0 /5 |
Fees $0 per trade for online U.S. stocks and ETFs | Fees $0 per trade | Fees $0 per trade. Other fees apply. |
Account minimum $0 | Account minimum $0 | Account minimum $0 |
Promotion Get $100 when you open a new, eligible Fidelity account with $50 or more. Use code FIDELITY100. Limited time offer. Terms apply. | Promotion None no promotion available at this time | Promotion None no promotion available at this time |
Advantages of bond ETFs versus individual bonds
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 April 25, 2022, a single share of the First Trust Municipal High Income ETF, or FMHI, was $49.33. 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.
» Read our primer on ETFs
On a similar note...
hou
