Friday, 21 June, 2024

Five reasons to invest in a bond ETF

Bond ETFs are a good option for those searching for an investment offering instant diversification of assets and the safety and lower risks bonds.
Here are a few reasons why you should consider putting your money into ETFs:

Lower risk

Investing in a bond ETF offers you relative safety because you are exposed to less risk than another ETF such as one made up of inherently riskier stocks. Government bonds are one of the lowest-risk investment options because they are backed by Central banks which are historically unlikely to default on their debt obligations. Therefore, your initial investment and interest earned are guaranteed.

Diversification

A bond ETF can give you access to bonds across maturities and interest rates.
Bonds are lower-risk assets and will contribute to balancing the level of risk and volatility of your investment portfolio.

Passive investment

A bond ETF can offer you a largely hands-off investment experience by automatically reinvesting the interest you earn and replacing the matured bonds in the fund. To make the most out of your investment, you can hold onto your shares in the ETF and sell them when their value has increased.

Cost efficient

Most ETFs have lower administrative and operating costs compared with other investment options.
Investing in an ETF gives you access to multiple bonds with one bond ETF investment, saving you from the extra transaction fees involved in purchasing the bonds individually.

Transparency

Some ETFs provide daily updates about their holdings such as the returns underlying assets, returns and asset value. Throughout your time as an investor in that ETF, you should have access to information about your investment at your fingertips.

Find out more about our bond ETF product here.