The bond market is large and complex, so it’s important to know what’s in your portfolio. The simple way to diversify bond part of the portfolio is to split is on two – US Treasures and Corporate bonds.
US Treasuries ETFs invest primarily in U.S. Treasury Notes of various lengths. Treasuries are among the most popular and safest bonds available, since the likelihood of the U.S. government defaulting on its debt is extraordinarily unlikely. TLT is one of the most popular options for investors seeking to establish exposure to long-dated Treasuries, is efficient from a cost perspective, offers exposure to hundreds of individual securities, and delivers impressive liquidity to those looking to execute a trade quickly.
Corporate Bong ETFs offer exposure to high-quality corporate bonds. Investment grade bonds are defined as having a credit rating of BBB or higher, which means they are at a very low risk of default. LQD is the most popular option for investors looking to gain exposure to investment grade corporate bonds, making it a useful tool for those looking to access a corner of the bond market that should be a core component of any long-term, buy-and-hold portfolio.