If you buy a bond and hold it to maturity, in most cases you’ll get back your principal, plus interest payments. But what happens when you buy an exchange-traded fund that invests in junk bonds and has a fixed maturity date, just like a regular bond?
Guggenheim BulletShares 2014 High Yield Corporate Bond ETF (symbol BSJE) and nine similar Guggenheim vehicles are a blend of ETF and target-date fund. Like many bond funds, they pay dividends monthly. But unlike most funds, these ETFs have fixed life spans: The 2014 fund tracks an index that seeks to replicate the performance of a portfolio of junk bonds that mature on December 31, 2014. On that date, the ETF will “terminate,” as Guggenheim’s Bill Belden puts it. Investors will get the net asset value per share as of the market close, and the fund will fold.
The index, which is managed by Accretive Asset Management, can invest in foreign bonds, but as of late February, 93% of its assets were invested in bonds issued by U.S. companies. When one of the ETF’s bonds matures, the proceeds are used to add to the remaining holdings. After July 2014, proceeds from matured bonds will be held in cash or in Treasuries in preparation for the fund’s termination.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
With an actual bond, of course, you know how much you’ll get back at maturity. With the Guggenheim ETFs, what you get at “maturity” will depend on the performance of the funds’ junk bond holdings.
ORDER NOW: Buy Kiplinger’s Mutual Funds 2012 special issue for in-depth guidance on the only investments you need.
-
Stock Market Today: The Dow Adds 15 Points To End Its Losing StreakEquity indexes opened higher but drifted lower as markets priced in new Fed forecasts.
-
What Is a Qualified Charitable Distribution (QCD)?Tax Breaks A QCD can lower your tax bill while meeting your charitable giving goals in retirement. Here’s how.
-
The 5 Best Actively Managed Fidelity Funds to Buy Nowmutual funds In a stock picker's market, it's sometimes best to leave the driving to the pros. These Fidelity funds provide investors solid active management at low costs.
-
The 12 Best Bear Market ETFs to Buy NowETFs Investors who are fearful about the more uncertainty in the new year can find plenty of protection among these bear market ETFs.
-
Don't Give Up on the Eurozonemutual funds As Europe’s economy (and stock markets) wobble, Janus Henderson European Focus Fund (HFETX) keeps its footing with a focus on large Europe-based multinationals.
-
Best Bond Funds to BuyInvesting for Income The best bond funds provide investors with income and stability – and are worthy additions to any well-balanced portfolio.
-
Vanguard Global ESG Select Stock Profits from ESG Leadersmutual funds Vanguard Global ESG Select Stock (VEIGX) favors firms with high standards for their businesses.
-
Kip ETF 20: What's In, What's Out and WhyKip ETF 20 The broad market has taken a major hit so far in 2022, sparking some tactical changes to Kiplinger's lineup of the best low-cost ETFs.
-
ETFs Are Now Mainstream. Here's Why They're So Appealing.Investing for Income ETFs offer investors broad diversification to their portfolios and at low costs to boot.
-
Do You Have Gun Stocks in Your Funds?ESG Investors looking to make changes amid gun violence can easily divest from gun stocks ... though it's trickier if they own them through funds.
