What Are Bonds? And What Are iBonds ETFs?
In a Nutshell
Bonds are loans to governments or companies that pay fixed interest and return principal at maturity, making them more predictable than stocks but requiring research and timing if bought individually. iBonds ETFs simplify this by bundling hundreds of bonds with the same maturity date into a single tradable fund, giving investors diversification, income, and a set timeline without managing each bond themselves. A bond ladder can be built by holding iBonds ETFs across multiple maturity years to spread risk and match future cash needs.
These notes were generated by AI and may contain inaccuracies.
The bond market has over 140 trillion dollars invested in it globally, making it larger than the stock market and far larger than cryptocurrency. Bonds play a major role in investing for the future.
A bond is an investment where you lend money, typically to a government or a company, for a set period of time until it reaches its maturity date. The maturity date of a bond is the predetermined date when your original investment is returned to you in full. You lend your money for a specific amount of time, and then get it back.
Bonds pay interest. The interest rate associated with a bond is how much the borrower pays you for using your money. It's usually an annual percentage, and it's paid out on a set schedule. Sometimes twice a year, sometimes more frequently depending on the bond.
Example: If you invest $1,000 in a bond with a 5% annual interest rate and a maturity date 5 years out, in 5 years, assuming the terms of the loan are met, your $1,000 will have turned into $1,250, representing 25% growth.
Many investors use bonds alongside stocks to help generate income, preserve capital, and add diversification to balance out some of the ups and downs of the market. With stocks, there's no set interest rate, so there's potential for big growth, but also big volatility. Even dividend-paying stocks can change their rates over time. Bonds work differently.
With a well-defined interest rate and maturity date, you know exactly when and how much money will be coming your way.
With bonds, to ensure you get back your full investment, you typically plan to stay invested until the maturity date. Selling a bond early could mean getting back less than you put in.
While bonds are generally considered lower risk than stocks, they still depend on the borrower being able to pay you back, so quality matters.
Unlike stocks, many bonds come with a minimum investment requirement.
While bonds can help provide income and stability, researching, diversifying, and managing risk and timing on your own can become complicated and pricey quickly.
Fixed-income exchange-traded funds, or bond ETFs, can help investors access a bundle of many bonds all at once. These bond ETFs allow investors to access bonds, similar to stocks, on an exchange. They provide daily transparency, ease of trading, and access to the bond market, but they don't typically have a maturity date like individual bonds.
Every iShares iBond ETF is made up of a collection of bonds professionally managed by the experts at BlackRock and built around the same maturity date.
With iBonds ETFs, you can pursue the stability and predictable income that bonds offer without having to do the work of researching, selecting, and tracking maturity dates for individual bonds yourself.
Instead of owning one bond at a time, with iShares iBonds ETFs, you're investing in a basket of bonds all working toward a similar maturity date, all on a timeline that works best for you.
iBonds ETFs typically hold hundreds of bonds. So, if one of them has trouble paying, its impact on your portfolio is typically much smaller.
Investing in iBond ETFs is a lot like cooking using a meal kit. You could make everything from scratch, which means picking what you want to eat, finding the recipe, making sure you have all the tools, and shopping for the ingredients. That's a lot of work.
Some nights, no problem. Other nights, you're busy, low on energy, and suddenly something's overcooked or underdone.
That's buying and managing individual bonds yourself. You're choosing each bond, checking quality, navigating minimums, and keeping track of all the different timelines.
On the other hand, you could use a meal kit. You still choose what you want to eat, but now the price is set, the chef-selected ingredients are carefully portioned, and everything is packaged to work together. The timing is built in.
That's how iBond ETFs work. You choose the maturity date, and instead of building a portfolio bond by bond, you're investing in a diversified bundle that's carefully positioned.
First, decide how bonds fit into your overall investment strategy. Are you looking for income, stability, or planning toward a specific date like a wedding or buying a house?
No matter the goal, iShares iBond ETFs are designed to help you achieve it, combining diversification, income, and a clear timeline into a single investment you can build around.
If you're thinking ahead across multiple years, you can take it a step further. iShares offers tools to help you build a bond ladder, spreading your investment across funds with different maturity years.
With 50 different funds, iShares iBonds ETFs are sure to have the recipe for whatever you're craving.
Investing carries risk. Before you put your money into anything, you should give it careful consideration. Always do your homework.
Visit www.iShares.com to view a prospectus, which includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. Investing involves risk, including possible loss of principal.
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