Bond ETFs are a type of exchange-traded fund (ETF) that can be used as an efficient and cost-effective way for investors to gain exposure to the fixed-income markets. Bond ETFs use pooled investments from multiple investors, allowing investors to benefit from the same economies of scale as mutual fund investing without having to buy bonds from individual issuers. ETFs like iShares Core U.S. Aggregate Bond ETF (AGG) track a bond index that includes Treasuries, corporate bonds and securitized debt.

Bond ETFs offer investors passive exposure to fixed-income investments, often at a lower cost than traditional mutual funds. Bond ETFs track a basket of pre-selected bonds, so investors do not have to worry about choosing individual bonds. For most investors, bond ETFs provide a cost-effective way to invest in fixed-income securities.

All bond ETFs come with some risk. In particular, bond ETFs are subject to interest rate risk. If interest rates rise, the value of the ETF will decline. This risk comes from the fact that bond prices move inversely to yields, so when yields rise, bond prices fall. That’s why it’s important to diversify your fixed-income investments by investing in different types of bonds, like Treasuries and corporate bonds, as well as in different maturities.

Fixed-income ETFs provide a convenient way for investors to add bonds to their portfolio. Bond ETFs are a good option for investors who want to provide dose of stability and income potential to their portfolios in an easy, efficient, and cost-effective way. As with any investment, it’s important for investors to understand the risks and potential rewards of bond ETFs before investing.