Set up a Bond Ladder with PowerShares

05/02/2018 5:00 am EST

Focus: BONDS

Chloe Jensen

Chief Analyst, Cabot Dividend Investor

Guggenheim’s sale of their ETF business to Invesco has been completed, and the BulletShares funds are now called the PowerShares BulletShares funds, explains Chloe Lutts Jensen, income expert and editor of Cabot Dividend Investor.

Other than the name change, I don’t expect anything about the funds’ management to change, although if you’re looking for more information about how the BulletShares funds work or can be used, Invesco has launched a friendly new website at bulletshares.invesco.com.

We’ve used the funds to construct a bond ladder, which is a conservative strategy for generating income by buying a series of individual bonds or defined-maturity bond funds that mature in successive years.

PowerShares BulletShares 2018 High Yield Corporate Bond ETF (BSJI — yield 4.0%)

PowerShares BulletShares 2019 Corporate Bond ETF (BSCJ — yield 1.8%)

PowerShares BulletShares 2020 High Yield Corporate Bond ETF (BSJK — yield 4.9%)

PowerShares BulletShares 2021 Corporate Bond ETF (BSCL — yield 2.4%)

Because the BulletShares funds mature at the end of the year in their name (at which point Invesco disburses the net asset value of the ETF back to investors), they are a good store of value even when interest rates rise.

And if you reinvest the proceeds of the maturing fund in a new, longer-dated holding every year, you can secure a rising income stream as rates rise.

You can construct your own ladder with either the investment-grade or high-yield funds, or a mix, as we’ve done.

The 2018 fund’s yield will gradually decline over the second half of this year as Invesco moves the fund into cash, so if you’d like to construct your own bond ladder today, start with BSCJ or its 2019 high-yield counterpart — the Guggenheim BulletShares 2019 High Yield Corporate Bond ETF (BSJJ).

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