Bond ETF, the New Star of 2010

Shawn | Nov 16, 2010 |

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What is a Bond ETF? A bond is a financial asset with fixed interest sold by governments, public utilities, corporations, and other money-making entities to consumers as a way to stimulate commerce with the promise of a certain amount of interest paid at the end of a given time period. ETF is an abbreviation for 'exchange-traded fund' and these types of investments have portfolios that deal only in bonds. Though similar to Bond Mutual Funds, the Bond ETFs have more streamlined and adaptable assets that make them more attractive to traders. Bond ETFs are becoming one of the most popular forms of investments made in 2010, with major growth seen in only a few months. If you are interested in bond investments, the Bond ETF might be the right one for you.

Bond EFTs are similar to Bond Mutual Funds in that they both deal in portfolios of different kinds of bonds. Stocks are not included in these portfolios. Bond ETF's are similar to stocks in that they do pay a broker fee, whereas Bond Mutual Funds do not include those kinds of fees. However, there is more fluidity in the Bond ETF portfolios than in Bond Mutual Funds. Instead of only being able to trade once a day like a normal, traditional Bond Mutual Fund, Bond ETF's can buy and sell throughout the day. Being able to buy and sell at any time gives Bond ETF's the ability to ride the immediate difficulties of the bond markets.

Bond ETF's are becoming the investment superstars of 2010, rising out of the relative obscurity of previous years. Perhaps that's because of the variety of different investments these Bond ETF's can invest in combined with the choice of short term or long term bonds and fluidity at which these investment groups can respond to the markets. The brokers can get more stability with diversity in everything ranging from high yield bonds to government treasuries. These bonds have been a haven in the economic troubles of the last few years. With other investments and commodities being so uncertain, Bond ETF's have seen a flow of 49 billion from January 2010 to July 2010 with almost half of that amount coming from fixed income portfolios. Bond ETF's are so popular it is believed they will soon be the major form of investment in the U.S.

Bond Mutual Funds have been the most sought after safe, though not always high yielding, investment until the recent surge towards Bond ETFs. Now that investors are starting to see how lucrative the added fluidity of Bond ETFs are in today's unpredictable market, they are more in demand than ever. By being able to change at the drop of a hat to follow current trends, Bond ETFs are looking like the new modern star of the investment world.