
Fixed Income ETFs are illiquid
Not true. During the extreme market volatility at the end of Q1 2020, ETFs have been at least as liquid as the underlying markets in which they invest, just as intended.
This website is intended for use by UK residents only and should be read in conjunction with the investment risks below.
Fixed Income ETFs had one of the best years in 2019, accounting for half the total ETF inflows in Europe. Amid the volatility seen in markets so far this year, investors are re-examining their fixed income allocation, including considering different types of Fixed Income ETFs. If you’re thinking about adding any sort of bonds to your portfolio, ETFs could offer a simple and transparent way to invest with typically low costs.1
Important information: The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Fixed Income ETFs are illiquid
Not true. During the extreme market volatility at the end of Q1 2020, ETFs have been at least as liquid as the underlying markets in which they invest, just as intended.
Sourcing bonds yourself is cheaper
It may not be. A large ETF provider can usually buy and sell bonds more efficiently and with lower costs than an individual can.
Passive index replication is too difficult
Not necessarily. An ETF provider can choose to track an index that has been modified to remove smaller-sized bonds that are harder to buy and sell.
Some investors will diversify their income portfolio by investing in a combination of government, corporate and high-yield bond funds. However, it’s possible to achieve even more effective diversification by including other types of Fixed Income securities. Find out how some funds may have higher risks but, when added to those more traditional bond funds, may be able to improve the potential for higher income and even reduce the volatility of the overall portfolio.
It’s normal for investors to keep some of their portfolio in low-risk funds that are easy to convert into cash, whether for emergency purposes or to provide a cushion against possible declines in the rest of their portfolio. However, with interest rates at such low levels, it is important these readily available securities are working for you. Find out about different types of securities that may be worth considering to meet your shorter-term liquidity needs.
Some funds will be in a portfolio to provide a foundation for long-term performance. As such, you may expect to hold them through all market conditions. Government and corporate bond funds are examples. There are often other funds, however, that are likely to only be in the portfolio during a specific time period or when markets are behaving a certain way. Find out about ETFs that can be used to meet longer-term portfolio needs and those that may help meet shorter-term objectives.
Download our Individual Bonds vs. ETFs white paper.
Size matters when you're investing in Fixed Income, and Invesco manages over US$ 1.2 trillion across asset classes globally. Our expertise across a wide range of Fixed Income strategies is combined with expertise in constructing and managing ETFs. The result? Some of the lowest-cost exposures to common benchmark indices and more innovative products, all aimed at helping you reach your financial goals. We also have a dedicated team working within capital markets to make buying and selling our ETFs as efficient and effective as possible.