The worst-performing fixed-income ETFs of the previous 10 years

Bonds flipped their protected and snoozy persona final yr after they went by means of one of many worst downturns in many years.

Bloomberg’s U.S. Combination Bond Index, a broad-based, extensively adopted benchmark of investment-grade and company bonds, fell 13.01% in 2022, the worst performance because it was created in 1976. Driving the ache: rapid-fire rate of interest hikes by the Federal Reserve, which continues to be laboring to tame persistent inflation that peaked final June at a 40-year excessive.

When bond costs fall, their yields, or returns to buyers, improve (the 2 components transfer in reverse instructions). And within the carnage of final yr, buyers have been piling in to benefit from the sale. Bond exchange-traded funds took in $24.5 billion in January 2023, rivaling their inventory counterparts regardless of holding round one-fourth the entire belongings, Morningstar wrote on Feb. 1.

Fastened-income ETFs are standard with monetary advisors as a result of they provide shoppers publicity to a number of devices, primarily bonds, by means of a single safety. The fund pays out the curiosity it receives on its underlying holdings, so an investor does not need to preserve observe of particular person maturity and redemption dates. The funds are additionally cheaper than shopping for bonds instantly, Bankrate says.

Nonetheless, some fixed-income ETFs place their bets on risky or unique investments, equivalent to sovereign bonds or international forex devices, or use fancy monetary derivatives to amplify their publicity to the index they observe.

Scroll by means of our slideshow to see which U.S. exchange-traded fixed-income funds had the worst returns over the previous 10 years. All information is from Morningstar Direct. One-year return information is for 2022; 10-year information is for Feb. 1, 2013, by means of Jan. 31, 2023.