Using Fixed Income ETF’s

If you are an individual, there are several trading options open to you. Most investors are aware of and make use of mutual funds trading in the market, but there are many other good options available to you.

One of the best options to keep you money safe is to use fixed income ETF’s . If you compare the other investment schemes, then this type of ETF is comparatively stable and the right way of investing your funds with reasonable returns. A proper understanding of this kind of trading activity can assist you in reaping the benefits of it.

As the name suggests, fixed income ETF scheme is the best for individuals who want a safe investment with a fixed income return. A majority of ETFs are made out of different kinds of bonds and stocks, out of which some are low risk while others are high risk ones. Fixed income ETF’s invest in assets and stocks that have a good return on investment record. Although these ETF’s offer lower returns or profits than the other ETF’s, an individual trader gets an assurance of stable returns and therefore, one can invest in this scheme to avoid losses. These ETF’s can be far better than the individually purchased bonds that have little stability in them.

How do fixed income ETF’s work?

For creating a fixed income ETF, you first need to identify the investment options and commodities that are only moderately affected by the market volatility. Bonds are ideal assets and therefore you need to identify the best type of bonds for your investment. Bonds such as Federal government bonds, corporate bonds and local or state government bonds are ideal for this purpose.

Now let’s consider the pros and cons of the fixed income ETF’s:

These ETF’s are better than the other investments due to the following reasons –

• ETF’s have low expense ratio, so it can be used with aggressive trading strategy.

• They also offer tight bidding – ask spreads thus offering more profit margins.

These ETF’s have the following cons –

• They require management fees.

• These fixed ETF’s do not offer any kind of flexibility for portfolio creation.

• If you compare the other ETF’s, then the fixed ones give fewer returns as compared to others.

In spite of minor flaws, the fixed ETF’s are quite popular with traders having aggressive portfolios.