Making the choice on where to invest your money when it comes to bonds may be difficult. Here's a guide on what bonds to invest in
A guide on what bonds to invest in

First off, let’s see what bonds are? They’re primarily IOUs issued by corporations and governments to raise their capital. That’s to mean buying a bond is like you are loaning that body your money, and after the agreed time, you’ll receive your money with interest.

Investing in bonds can be one of the best ways you can protect your nest eggs. Theycan cushion you in times of uncertainties. Yes, they offer stability and returns that equities can’t match.

Types of Bonds

If you're wondering what bonds to invest in, there are two primary types; government an corporate
If you’ve been wondering about what bonds to invest in,there are two main types; government and corporate

We have two types of bonds.

  • Government bonds: they’re issued by countries or states. Honestly, they are safer, especially when attached to a pioneer economy such as the U.S. or Germany.
  • Corporate bonds: these are issued by companies. They’re considered riskier than government bonds, although it depends on the company you want to invest with.

Investing in bonds means that you’re purchasing them outright and including them in your portfolio. Therefore, it can be tricky if you do this directly with the issuers since, mostly, you’ll be required to pay a minimum lot of £100,000. That explains why many individual investors prefer investing via a fund like the bond Exchange Traded Fund (ETF).

The best bonds to invest in for first-timers

A simple breakdown of what bonds to invest in for first-timers
A breakdown of what bonds to invest in for first-timers

iShares Core U.S. Aggregate Bond ETF (AGG)

iShares Core U.S. Aggregate Bond ETF (AGG) is one of the largest ETFs on the wall street. It can be best for you if you don’t know how you can decide balance risk and yield. Another interesting thing with AGG is that it’s one of the most popular fixed income options available.

Moreover, this fund exposes beginners broadly to U.S.investment-grade bonds such as Corporate bonds from spectacular firms like Bank of America Corp (BAC), agency mortgage debt from entities backed by the government, and Treasury bonds.

Almost half of the AGG’s holding includes government securities, and 75% of all its holding are AAA rated.

This bond offers diverse options and focuses on lower risk. Also, it comes withan appealing scale and liquidity.

Another thing to note is that all ETFs track the underlying index movement. For AGG, Bloomberg Barclays U.S Aggregate Bond index is responsible for measuring how all U.S.investment-grade bonds perform.

AGG holds AAA-rated assets.

Vanguard Total Bond Market Fund (VBTLX)

VBTLX is one of the best solid bonds that a beginner can complement a three-fund portfolio.

The reason why this bond can be effective for beginners is that it tracks how Bloomberg Barclays U.S. Aggregate Float Adjusted Statistics Index performs. This body invests in diverse fixed-income securities such as mortgage-backed securities and corporate bonds.

The best part is that all Vanguard bonds are low-cost, and Vanguard Total Bond Market Fund is one of them. Just imagine an expense ratio of 0.05%. Isn’t that amazing?

Vanguard Total Bond Market Index Fund (BND)

Like the Vanguard Total Bond Market Fund (VBTLX), BND also tracks how Bloomberg Barclays U.S. Aggregate Float Adjusted Statistics Index performs. Its top investment holdings include Treasury bonds, Federal National Mortgage Association bonds, and T-notes.

BND holds both AAA-rated and BBB-rated assets, unlike AGG,which holds only AAA-rated assets. Also, it invests intentionally in dollar-denominated bonds.

iShares iBoxx $ Investment Grade Corporate Bond ETF

Here is another bond for beginners who are looking for what bonds to invest their money.iShares iBoxx $ Investment Grade Corporate Bond ETF only invests in AAA and BBB-rated dollar-denominated corporate bonds.

Assuredly, this type of bond includes high-profile companies such as Goldman Sachs, GE, CVS, and Anheuser-Busch. Its top ten holdings constitute up to 2.5% of its total net assets ($40 billion).

Feel free to check out Everything You Need to Know Before Making Your First Investment

iShares Core Corp Bond UCITS ETF (IEAH)

Just like the other bond ETFs, iShares Core Corp Bond UCITS ETF tracks how Bloomberg Barclays Euro Corporate Bond Index performs. Its top holdings comprise of Orange, Volkswagen, Rabobank, Total, and Anheuser-Busch.

The only thing that distinguishes IEAH from other bonds is that it’s UCITS-approved and usesGBP as their currency. That means that the U.K. investors can buy comfortably without incurring any currency conversion charges.

Vanguard Intermediate-Term Corporate Bond Index Fund (VCIT)

With this bond, you’re exposed to corporate bonds with medium-term maturities- five to ten years. It focuses mainly on utility, industrial, and financial companies. Some of the biggest companies it deals with include Wells Fargo, AbbVie, CVS Health, and Verizon.

VCIT deals with investment-grade assets where 56% of them are BBB-rated while 37% rate AAA-rated.

In a Nutshell

Do you know what bonds to invest your money now? Remember that buying a bond is like lending your money to an insurer. After the bond matures, you’ll receive a coupon and return of your capital.

You may also be interested in reading How To Invest Money – A Simple Guide For New Investor


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