A fixed income ETF tracks a basket of debt securities — issued by governments (government bonds) or companies (corporate bonds) — with a maturity and yield set by the market.
The value of a bond ETF is more stable than an equity ETF, but it isn't risk-free: it's sensitive to interest rates (when rates rise, the value of existing bonds tends to fall) and, for corporate bonds, to the issuer's credit risk.
They're often used to balance the equity portion of a portfolio, reducing overall volatility, or as the more conservative part of a portfolio as an investor approaches their goal (e.g. retirement).
Suitable if you...
- You want to reduce your portfolio's overall volatility
- You're approaching your investment time horizon and want more caution
- You're looking for a more stable component alongside an equity allocation
Consider carefully if you...
- Your only goal is maximum long-term capital growth
- You don't consider the effect of interest rates on the fund's value
- You expect returns comparable to equities' historical returns
Most followed Fixed Income ETFs
See all →Frequently asked questions
Why can a bond ETF's value fall?
The price of the bonds held moves in relation to interest rates: when rates rise, the market value of existing bonds (with a lower coupon) tends to fall, and vice versa.
Government bonds or corporate bonds — which is better?
Government bonds (especially from solid countries) are generally considered safer but with a lower expected return; corporate bonds offer potentially higher returns in exchange for higher credit risk.
Does a bond ETF always pay income?
It depends on the version: distributing ones pay out the coupons received periodically; accumulating ones reinvest them automatically.