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Historically low credit spreads make any credit risk uninteresting. Duration is also not favorable, with Trump's rhetoric and possible actions contributing to upward revisions in inflation expectations. We also don't particularly like taking the credit approach to banking right now, with deregulation also on the agenda.
I favor the iShares 5-10 Year Investment Grade Corporate Bond ETF for its intermediate-term exposure and low expense ratio of 0.04%. Lower implied interest rates and a steepening yield curve could boost IGIB ETF's price returns in excess of the potential impact on the ETF's income component. I believe the IGIB ETF has a well-diversified portfolio, respectable dividend profile, and compelling expense ratio, which enhances its long-term total return prospects.
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Taking on credit risk but not interest rate risk has been relatively rewarding to ETF advisors and investors thus far in 2024. The iShares Broad USD High Yield Corporate Bond ETF (USHY) had a year-to-date total return of 3.6% as of July 8.
iShares 5-10 Year Investment Grade Corporate Bond ETF is worth considering for diversifying investment portfolios. IGIB primarily invests in U.S. investment-grade corporate bonds with maturities ranging between 5 and 10 years. The ETF's holdings consist of bonds from reputable companies with high solvency and cash generation capabilities.
iShares 5-10 Year Investment Grade Corporate Bond ETF offers attractive yield and low default rates but may experience a selloff in an economic recession. IGIB has performed poorly since 2021, declining by over 21% due to the Federal Reserve's tightening monetary policy. Despite the potential downside risk, long-term investors should view the negative spike as a buying opportunity, as IGIB has outperformed its treasury peer in the long run.
Investment-grade bonds offer an attractive opportunity in the current economic climate, with declining inflation and lower growth expectations. The iShares 5-10 Year Investment Grade Corporate Bond ETF provides a balanced approach to fixed-income investing and aligns with investors seeking income generation and capital preservation. A pair trading strategy involving shorting the S&P 500 and buying IGIB has historically performed well during times of financial stress but may underperform if the economy reaccelerates.
FAQ
- What is IGIB ETF?
- Does IGIB pay dividends?
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- What is the current assets under management for IGIB?
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- What is IGIB inception date?