Exchange-Traded Funds For Dummies by Russell Wild

Author:Russell Wild [Wild, Russell]
Language: eng
Format: epub, pdf
ISBN: 9781119828853
Publisher: Wiley
Published: 2021-11-04T00:00:00+00:00

The Whole Shebang: Investing in the entire U.S. Bond Market

The broadest fixed-income ETFs are all-around good bets, especially for more modest-sized portfolios. Note that these bonds use a total bond market approach, which means about two-thirds government bonds and one-third corporate. These funds also make the most sense for investors with lots of room in their tax-advantaged retirement accounts. If you have to stick your bonds in a taxable account, you’re probably better off separating your Treasury bonds and your corporate bonds. Reason: You get a small tax break on Treasury bond interest, in that you do not have to pay state income tax. If, however, your Treasury bonds are buried in an aggregate fund, such as these, you have to pay state income tax on the interest. Dem’s da rules.

Note that the terms aggregate bond, total bond, and core bond can be a bit misleading in that they represent bonds issued by the federal government (Treasury and agencies) and by corporations, but as a rule, they do not include tax-free municipal bonds, which make up a good chunk of the true total bond market but are considered an entirely separate genus from taxable bonds. They also do not include Treasury Inflation-Protected Securities, also known as TIPS. That, too, is considered a different beast, kept aside from other “conventional” bonds.

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