Posted on 27 September 2011.
Bonds have teamed up with ETF’s as exchange traded bond funds. This new financial instrument provides investors with the exciting possibilities of ETF’s while maintaining the reliability and safety found in bonds. Furthermore, these new funds add some transparency that has always been lacking in typical bond funds.
At first glance, an exchange traded fund looks like a mutual fund. The big difference is that investors can trade exchange-traded funds just as if they were regular stocks. This financial instrument has been around since the early 1990’s. The idea of an exchange traded bond fund is a little more revolutionary, but it is starting to acquire a lot of popularity with investors for a variety of reasons.
Bonds have always suffered a boring reputation. They are reliable investments if you are not looking to make a lot of money fast. Investors often retreat into bonds when they feel that the market as a whole has become unstable. They park their cash in bonds and more reliable stocks while they wait for investment opportunities to reappear.
The advent of exchange traded bond funds has altered that reputation somewhat. These new financial instruments have combined the reliability and safety of bonds with the diversification of exchange-traded funds and the trading convenience of stocks. Investors do not have to wait until the maturity date for their bonds. Instead, they can trade these funds daily on the stock market.
This kind of fund provides great, new alternatives for investors in a fluctuating and volatile market. It is no longer necessary to make a long-term retreat to bonds with much of your money. Instead, you can invest in exchange traded bond funds, which provide safety as well as the convenience of mobility when circumstances in the market suddenly improve.
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