iBonds are bond ETFs created by BlackRock, the world’s largest asset management company. They invest in a mix of bonds with the close maturity dates and are designed to behave like a bond – with a fixed maturity date – but with the flexibility and diversification of an ETF.
What Advantages Do iBonds Have?
Lower Risk vs. Individual Bonds: Because iBonds hold a diversified portfolio of bonds, the risk of one issuer defaulting has much less impact compared to holding a single bond. iBonds are still investment products and they are not risk-free.
Diversified Risk: By holding dozens or hundreds of bonds, iBonds reduce the default risk compared to buying one corporate or government bond.
Defined Outcome: At maturity, investors get back the proceeds of the underlying bonds, offering clarity similar to owning an individual bond.
Flexibility: You can buy or sell shares anytime before maturity, unlike traditional bonds which may be illiquid.
Bond Laddering Made Simple: iBonds ETFs are well-suited for building bond ladders, since you can pick ETFs with different maturities. This helps manage reinvestment risk and provide predictable cash flows.
How are iBonds traded?
Since iBonds are ETFs, they are freely traded on the exchange. Orders will be executed instantly during exchange business hours in most cases.