What is a Fixed Income ETF?

Fixed income ETF investment is a strategy for lower-risk investors on a fixed income. ETFs, or exchange traded funds, track an index of investments as they trade. The total value of the ETF, then, is the sum of the value of all of its parts. ETFs can minimize risk because they are made up of both low risk options, like some municipal bonds and high risk options. 

Fixed income ETF portfolios make ETF options, which were once only available to institutional investors, more available to the average person investing in the market. The buy-in for the fixed income options is lower, and the returns tend to be more modest as well. However, the returns also tend to be higher than those with most CD's. 

CD's used to be the most prevalent form of safe investment for the fixed-income investor. However, CD rates are far lower than average market earnings, and investors see little advantage to purchasing a CD over simply saving the funds in a high-yield savings account. Fixed income ETFs offer the best of both worlds in an ideal scenario. Of course, there is still risk the funds may decrease in value. There is also risk inflation will out-grow the pace of gains on the ETF portfolio.

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