Do investors need bonds in their portfolios?
The question is a personal one. Investors with goals in the three- to 10-year range—say, buying a new home, starting a business, or retiring within the next decade—likely do need them. So do those who are already retired. Bonds are also favored by investors who may not be comfortable with being 100% invested in stocks, no matter their time horizons.
Exchange-traded funds that focus on fixed-income securities can be excellent ways for investors to get exposure to bonds. Here are a few reasons:
- Many ETFs are transparent—most track indexes with very specific duration and credit-quality traits—and offer few surprises.
- The best ETFs are low-cost, which is even more important when investing in bonds than in stocks: Every extra point paid in expenses is one less point in return, and returns are typically tougher to come by with bonds than with stocks.
- ETFs are easy to buy and sell.
A good …