Latest news, trends and ideas for investing with exchange traded funds | ETF Commentary

For investors willing to look beyond cash for yield, bonds are the next step up the risk ladder. The WSJ‘s Jonathan Burton explores how ETFs can play a role in his article Using ETFs for Bond Bets.

Building a diversified portfolio of individual bonds is hard and expensive for most investors, so funds are the better way to go. ETFs have an advantage over actively managed mutual funds due to their low cost, flexible trading and tax efficiency.

To get started in Bond ETFs, Burton points out that many advisors recommend iShares Barclays Aggregate Bond Fund (AGG) for exposure to a broad mix of bonds. A similar offering is the Vanguard Total Bond Market ETF (BND).

Other ETFs mentioned in the article:

Corporate – iBoxx Investment Grade Corporate Bond Fund (LQD), iBoxx High Yield Corporate Bond Fund (HYG)

Shorter term – iShares Barclays Intermediate Credit Bond (CIU), iShares MBS Bond Fund (MBB)

Munis - iShares S&P National Municipal Bond (MUB), Powershares Insured National Municipal Bond Portfolio (PZA), Market Vectors Long Municipal Index (MLN)

For a complete listing of fixed income ETFs, see the ETF Directory

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The Financial Times’ Sophia Grene reported that a conflict will result from the pending acquisition of Lehman Brothers’ US Banking operation by Barclays Global Investors (BGI).

In the story BGI iShares affected by Lehman acquisition, Grene notes that BGI’s iShares division runs $40bn of ETFs based on Lehman indices. BGI will either have to get a special exemption or suspend those particular ETFs due to US rules that say that an ETF may not track an index owned by the asset manager or its parent.

iShares ETFs based on Lehman indices include:

• Lehman Aggregate Bond Fund (AGG)
• Lehman 1-3 Year Treasury Bond Fund (SHY)
• Lehman TIPS Bond Fund (TIP)
• Lehman 7-10 Year Treasury Bond Fund (IEF)
• Lehman 20+ Year Treasury Bond Fund (TLT)
• Lehman Short Treasury Bond Fund (SHV)
• Lehman MBS Bond Fund (MBB)
• Lehman 1-3 Year Credit Bond Fund (CSJ)
• Lehman Intermediate Credit Bond Fund (CIU)
• Lehman Intermediate Government/Credit Bond Fund (GVI)
• Lehman 10-20 Year Treasury Bond Fund (TLH)
• Lehman Credit Bond Fund (CFT)
• Lehman Government/Credit Bond Fund (GBF)
• Lehman 3-7 Year Treasury Bond Fund (IEI)

A complete list of iShares ETFs and Fixed Income ETFs is available in the ETF Directory at ETF MarketPro.

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