What are Bond ETFs?

While a share gives you ownership of part of a company, a bond is debt that a company or government can issue/sell to raise money. When you invest in a bond, you are effectively loaning money to a company or government with the promise that they will repay you (with interest) down the line. Bond ETFs enable you to buy many different bonds in a single trade.

Bond ETFs are especially important for investors as buying individual bonds is very difficult. Bonds often trade at a minimum lot size of USD 1 million so buying bonds directly is normally something only large banks or investment companies could do. Bond ETFs have opened up investment opportunities for the regular person that would normally only have been available to the professionals.

Bonds tend to behave differently than stocks, meaning they can offer important diversification to a portfolio as well as being a source of income.

Examples of Bond ETFs:

• Government Bond ETFs: Allow you to invest in the debt issued by governments
• Investment Grade Corporate Bond ETFs: Allow you to invest in the debt of companies with high credit quality
• High Yield Corporate Bond ETFs: Allow you to invest in the debt of companies with low credit quality

Want to know more? Take a look at the Bond ETFs available to buy in your region.