Guggenheim Investments has introduced an online resource to help advisors and investors use the firm’s BulletShares ETFs to build a more efficient laddering strategy consisting of investment-grade and high-yield ETFs with varying terms to maturity.
Advisors and investors can access the BulletShares® ETF Bond Laddering Tool by visiting guggenheiminvestments.com/bondladder. The Laddering Tool can be used to customise a hypothetical ladder by factoring such criteria as maturity range, portfolio weighting, duration, yield distribution, yield-to-maturity, yield-to-worst, and number of holdings.
"Bond laddering offers a number of potential benefits, but creating bond ladders with individual bonds can be time consuming and cost prohibitive," says William Belden, Managing Director, Product Development at Guggenheim Investments. "In contrast, Guggenheim BulletShares ETFs offer investors a cost effective and convenient approach to portfolio laddering."
Launched in 2010 as the first defined maturity corporate bond ETFs available in the market, the Guggenheim BulletShares lineup now consists of 18 unique defined-maturity investment grade and high yield corporate bond ETFs with more than USD6 billion in assets under management.
Unlike other fixed-income ETFs, BulletShares are designed to mature in their target year, providing investors with specific maturities to ladder portfolios or to manage their fixed-income exposure within specific investment time frames. With maturity dates spanning from 2015 to 2024, BulletShares ETFs track indices of approximately 30 to 300 corporate bonds with effective maturities in the same calendar year as each fund's maturity.
As bonds in a laddered portfolio mature, the cash distribution is generally utilised to cover lifestyle needs or reinvested in new bonds at the longest maturity of the ladder at the then current interest rate. Prior to maturity, this approach offers potential advantages in both rising and falling interest rate environments.
"If interest rates increase, an investor can reinvest the proceeds, if any, from maturing bonds at higher interest rates," Belden says. "If interest rates decrease, the investor potentially benefits from price appreciation as the portfolio's higher-yielding bonds increase in value."