A Bond Ladder with 4 ETFs

04/19/2017 2:50 am EST

Focus: ETFs

Chloe Jensen

Chief Analyst, Cabot Dividend Investor

These four funds make up our bond ladder, a conservative strategy for owning fixed income that’s particularly good at preserving capital when interest rates are rising. 

Guggenheim BulletShares 2017 Corporate Bond ETF (BSCH) — yield 1.4%

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

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

Guggenheim BulletShares 2020 High Yield Corporate Bond ETF (BSJK) — yield 4.8%

Each ETF will mature at the end of the year in the fund’s name, and Guggenheim will distribute the net asset value (NAV) of the fund to shareholders at that point—just like getting your principal back when a bond matures. 

Because of this maturity feature, these bond funds don’t lose value when interest rates rise like traditional bond funds. At the end of each year, we’ll sell that maturing fund and reinvest the funds into a new longest-dated ETF to preserve the bond ladder. 

Note that the last letter in each of Guggenheim’s ETFs corresponds to the maturity year, so if you’re constructing a four-year ladder starting in 2017, your funds should end in H, I, J and K, whether you’re using high yield or investment grade funds.

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