Bond ETFs

Fixed income exchange-traded funds (ETFs) can be a low-cost way to diversify your portfolio, and they trade similar to stocks, enabling you to buy and sell at any time during the trading day.

Key benefits.

Bond ETFs can diversify and help lower overall portfolio volatility over time, and their payments can be used to supplement your income. They are also usually cost-effective, and can provide access to a professionally managed (active or passive) portfolio. Take a closer look at the benefits.

What does Schwab offer?

  • Access to bond ETFs from a range of providers including Charles Schwab Investment Management, Inc.
  • Online search and screener tools that can help you research, choose, and buy ETFs
  • Guidance from Schwab Fixed Income Specialists
  • Low management fees and commission-free online trades in a Schwab account1
null null null

Easily build your own bond ladder with our new online CD & Treasury Ladder Builder.

What is a bond ETF?

When you buy shares of a bond ETF, you buy a piece of a bond portfolio. However, unlike individual bonds, most bond ETFs don’t have a maturity date. And ETFs trade on an exchange, like stocks, so you can buy or sell them at any time during the trading day.

Why would Schwab recommend bond ETFs?

Bond ETFs can give investors a way to diversify in many segments of the market through a single investment or a handful of investments. Generally, bond ETFs have lower transaction costs than individual bonds, and their prices are quoted throughout the day like stocks.

What does Schwab charge to trade bond ETFs?

  • Online Trades
  • Automated Phone Trades
  • Broker-Assisted Trades
  • All listed ETFs, including Schwab ETFs™
  • Online Trades
  • Automated Phone Trades
    $5.00 service charge
  • Broker-Assisted Trades
    $25.00 service charge

Take a closer look at the benefits.

  • Diversification

    Bond ETFs generally invest in a large number of individual bonds from different issuers. This diversity helps protect an investor if the bonds from a single issuer either fall in value or default.

  • Tax efficiency

    Bond ETFs trade between investors on an exchange. For many ETFs, those trades don’t require changes to the underlying securities the fund holds (unlike mutual funds), so there are generally fewer taxable consequences for the fund. In addition, ETFs that track an index generally change less over time, which may keep capital gains at a minimum.

  • Transparency

    Holdings are disclosed on a daily basis, so investors know exactly what securities their ETFs hold.

  • Flexibility

    Like stocks, bond ETFs trade throughout the day and can use limit and stop-limit orders.

  • Expenses

    Bond ETFs typically have lower operating expense ratios (OERs) than bond mutual funds, especially actively managed funds. In addition to the OER, investors may incur commissions and bid-ask spread costs. Schwab ETFs and all listed ETFs trades are commission-free.1 Schwab offers commission-free online trades in a Schwab account.

Review the risks.

Bond ETFs are subject to many of the same risks as most fixed income securities, such as interest rate, credit, liquidity, reinvestment, inflation (or purchasing power), and market and event risks. In addition, investors face volatility and price-to-net-asset-value risk.

Leveraged bond ETFs or ETFs with a more narrow focus may experience more severe price movements than traditional bond ETFs.

Price to net asset value
The market price of a bond ETF could vary from the net asset value (NAV) of the underlying securities. While the share value is usually close to the NAV, in some cases the price may be more or less than the underlying value per share.

Details about bond ETF risk

The risk that a security will default or that its credit rating will be downgraded, resulting in a decrease in value for the security. The measurement of credit risk usually takes into consideration the risk of default, credit downgrade, or change in credit spread.

The relative ability of a security to be sold without substantial transaction costs or reduction of value. The harder it is to sell a security or the greater the loss in value resulting from a sale, the greater the liquidity risk.

The risk that cash flows from an investment will be reinvested when interest rates are lower, resulting in a possible reduction in cash flow. To mitigate reinvestment risk, an investor can purchase non-callable bonds, which are not subject to early redemption, and/or ladder bond maturities at different intervals over time.

Inflation (purchasing power)
The risk that inflation will erode the real return on investment. This occurs when prices rise at a higher rate than investment returns and, as a result, money buys less in the future. The risk is greatest if you’re investing over long periods of time. Inflation-protected securities can be used to mitigate inflation risk.

Market and event
The risk that a change in the overall market environment or a specific occurrence such as a political incident will have a negative impact on the price/value of your investment.

Talk to a specialist

Get assistance from over 100 Schwab Fixed Income Specialists, who draw on an average of over 21 years of experience.2

Call 877-906-4670

Find bond ETFs.

  • ETF Select List®

    Schwab's quarterly updated ETF Select List is designed to inform and support self-directed investors searching for the right ETFs to fit individual investment needs and goals. The ETF Select List provides prescreened, low-cost bond ETFs representing 16 categories.

  • Schwab ETFs

    Each Schwab ETF provides exposure to a distinct asset category, so they're designed to be core building blocks for a diversified portfolio. And Schwab clients trade them commission-free online1 in their Schwab account.

  • Bond ETF Screeners

    Find and filter fixed income ETFs using criteria including category, yield, and expenses.

  • Go even deeper

    Schwab clients can view ETF quotes, compare investments, and review industry-leading research all in one place.

Talk to a specialist

We're here to help.

Looking to trade bonds or CDs online?
Get access to our tools from your Schwab account

Clients of independent investment advisors:
You may also contact your advisor or call Schwab Alliance at 800-515-2157