What are Fixed Income ETFs?

Fixed Income Exchange Traded Funds (ETFs), also known as bond ETFs, track performance of fixed-income securities usually bonds. They offer the traders the flexibility of trading stocks and same time offer benefits from investing in bonds. Fixed income ETFs were introduced in 2002 and now there are a number of ETFs available in this category which track broad bond market or track specific sectors like government, mortgage-backed or corporate bonds.

Fixed income ETFs moves just like stocks, they can be intraday-traded and can be short traded at any time. Any thing that affect the performance of trading bonds affect prices of ETF shares; this include interest rate changes, changes in bond yields (in comparison to other bond, usually a US Security bond), and changes in yield curve (yields from bonds of different maturities). Unlike fixed-income bonds where capital gains and interest are paid semi-annually, these ETFs usually pay interest dividend on monthly basis and capital gains on annual basis.

Fixed income ETFs greatly benefit long-term traders and traders who trade from their retirement accounts. These ETFs can also be used to other purposes like for profiting from interest rate changes, for short-term profits, or to hedge account risks. But they are not devoid of trading risks and active trading of them can cost high as they include same brokerage fees like stocks.

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