facebookFor norm ETFs, it is made up of a basket of stocks. In the case of bonds, is that how bonds ETFs are like as well? If that is the case, isn't it problematic because bonds are constantly maturing? - Seedly
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Anonymous

09 Mar 2020

For norm ETFs, it is made up of a basket of stocks. In the case of bonds, is that how bonds ETFs are like as well? If that is the case, isn't it problematic because bonds are constantly maturing?

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    What are your thoughts?

    A more direct answer to whether its problematic is "yes, but not because bonds are constantly maturing." The real issue is balancing the return and the duration of a bond portfolio, that is, the sensitvity of the portfolio to interest rate cahnges. The use of different maturities is necessary to acheive the desired yield of the portfolio while maintaining an palatable duration

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      Hariz Arthur Maloy

      Hariz Arthur Maloy

      21 Mar 2019

      Level 17ยทIndependent Financial Advisor at Promiseland Independent

      https://www.etf.com/etf-education-center/how-do-bond-etfs-work

      All you need to know.

      How Do Bond ETFs Track Their Indexes?

      Traditional bond indexes make great benchmarks, but terrible portfolios. Most equity ETFs hold every security in their index. But that's usually not possible with bonds. Bond indexes often include hundreds, even thousands, of individual securities. Buying up all those bonds for an ETF's portfolio is not only difficult, but expensive. The cost to purchase thousands of bonds in illiquid markets, even those with minimal impact on the index, can quickly erode returns.

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        Yes, it is formed by different bonds who have different maturity dates....

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