Five Bond ETFs for the Worried Investor

Joel Anderson  |

Coming off of a year when the S&P 500 gained almost 30 percent, there doesn’t really seem to be any reason not to invest in equities. Where could you go wrong? Stocks rapidly gain value, sometimes doubling or tripling their share price in a single year! Not like stupid bonds, which crawl along with steady returns but will never really take you to the promised land.

Of course, if you had asked anyone in early march of 2009, around the time when the S&P 500 was below 700 and at the end of a 15-month slide that saw it shed more than 55 percent of its value, it might have been a different story. Stocks rapidly lose value, sometimes shedding half, or two thirds your investment in a single year! Not like wonderful bonds, which crawl along with steady returns without crashing and making you take out a second mortgage on the promised land.

And that’s the reason why investing in bonds will never go completely out of style: it includes very little risk, relatively speaking. It’s the tortoise investment approach to the equities market’s hare. And in many instances, reducing risk is the name of the game. For someone five years from retirement, it doesn’t make much sense to expose yourself to the potential of a bad year for the stock market (unless they haven’t done a great job to this point saving for said retirement).

And, just like in stocks, bonds have a number of ETFs that package a portfolio of bonds to track the performance of a particular index. Here’s a look at the five bond ETFs with an average daily volume exceeding 2 million shares.

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iShares 20+ Year Treasury Bond ETF ($TLT)

Index: Barclays Capital U.S. 20+ Year Treasury Bond Index

Dividend Yield: 3.25 percent

Expense Ratio: 0.15 percent

Made up of U.S. Treasuries at least 20 years from maturity.

SPDR Barclays Capital High Yield Bond ETF ($JNK)

Index: Barclays Capital High Yield Very Liquid Index

Dividend Yield: 6.05 percent

Expense Ratio: 0.40 percent

It’s all in the ticker. This ETF contains higher-risk, high-yield, “junk” bonds.

PowerShares UltraShort Barclays 20+ Year Treasury ETF ($TBT)

Index: Barclays Capital U.S. 20+ Year Treasury Bond Index (-200 percent)

Dividend Yield: -

Expense Ratio: 0.95 percent

Tracking the same index as TLT, but inverse and leveraged, so it moves double in the opposite direction of the index.

iShares iBoxx $ High Yield Corporate Bond ETF ($HYG)

Index: iBoxx $ Liquid High Yield Index

Dividend Yield: 6.09 percent

Expense Ratio: 0.5 percent

Includes a broad representation of high-yield, American corporate bonds.

PowerShares Senior Loan Portfolio ($BKLN)

Index: S&P/LSTA U.S. Leveraged Loan 100 Index

Dividend Yield: 4.4 percent

Expense Ratio: 0.66 percent

According to the PowerShares website: “The Index is designed to track the market-weighted performance of the largest institutional leveraged loans based on market weightings, spreads and interest payments.”

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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