Cash & Bonds The 25 fixed Income ETFs: How to assess the field

The 25 fixed Income ETFs: How to assess the field

 

Thanks for posting Nodrog .
Good reminder of why it is hard to get enthused to invest in these type of assets.

 

Fixed Income is a very misleading term. A licensee or adviser could be prosecuted for misleading and deceptive conduct using that term with client product advice.

Income ETF, Income Securities etc are better descriptions.

Fixed income infers a fixed rate of return - Coupon like a bond. So any movement in market rates affects the capital not the rate of return. Income ETFs have a variable (floating ?) return that determines the distributions each monthly, quarter, semi or annual period. They cannot be fixed income.

And in almost all ETFs the underlying investment mix will progress with time and in a declining yield environment the reinvestment into new and replacement securities in the fund will produce reduced returns (assuming a declining yield) so the return is not fixed.

Many investors have run to income securities when deposit rates declined due to falling rates and declining bank margins. However there is a vast difference between a term deposit and a junk bond ETF. As the economy approaches uncertainty and a potential recession and difficulty for mainstream lenders to lend to many corporates with ease a ETF investor must consider the inherit risks.