Fixed income investments have been a very popular form of investment. They usually pay the returns on a fixed, predetermined schedule, although the amount of the payments could vary. While the individual bonds may be the most-known kind of fixed income securities, the category of fixed income investments also includes money market funds, CDs, bond funds, and fixed income exchange-traded funds (ETFs), which shall be discussed in this article.

Fixed income ETFs or fixed income funds are baskets of fixed income investments that are traded as a single, individual unit throughout the trading time of the day.

VanEck Vectors Fallen Angel High Yield Bond ETF (ANGL)
This is one of the best fixed income funds (ETF) essentially tracks a weighted (by market value) index of bonds that were, during issuance, rated investment grade but were later relegated to sub-investment grade. This fixed income ETF searches for “value” in the high-yield sector by singling out bonds that have been relegated/downgraded or are under duress (nicknamed “fallen angels”). The investment thesis is such –short-term downward pricing pressure is generated when credit downgrades occur. Essentially, future credit upgrades will compress the spread, which could lead to possible appreciation in price. On a parallel path, the strategy also aims to buy low and sell high trying to maximize total returns. ANGL, however, has limitations—it has only American dollar issues, it has credit risk, and it also has significant interest rate risk due to high average duration and maturity. However, it possesses a substantial debt share from non-US issuers, so that’s a consolation.

ProShares High Yield-Interest Rate Hedged ETF (HYHG)
The ProShares High Yield-Interest Rate Hedged fixed income ETF, is one of the best fixed income funds, which tracks an index that works as follows—it shorts a combination of 2-year, 5-year, and 10-year Treasuries and goes long on a duration-matched high-yield USD debt from Canadian and US issuers. HYHG’s objective is to minimize the risk that arises due to interest rates while providing credit exposure. The ProShares ETF’s high-yield holdings are denominated in American dollars and are limited to Canadian or American-based issues that were issued in the last 5 years. This approach leads to portfolio concentration as well as elevated risk. Onscreen spreads could be high, and trading volumes are modest, although block trades are feasible with a little bit of effort. While this fixed income ETF has a reasonable fee, its interest expenditures are a bit troubling.

Guggenheim BulletShares 2022 High Yield Corporate Bond ETF (BJSM)
This is one of the best fixed income funds (ETF) that tracks a high-yield corporate bonds index (market-weighted) with maturities effective in December 2022. As part of Guggenheim’s BulletShares group, the BSJM ETF behaves more like a bond rather than exhibiting bond fund behavior. This ETF provides bullet maturity rather than perpetually expose it to the maturity pocket of the US high yield scene. As the ETF matures, its YTM (yield-to-maturity), duration as well as maturity will continue to wane. On the maturity target date (Dec 31 ^st , 2022), this fund will wind up and give back all the capital to investors, allowing BJSM to be used a foundation for a bond ladder. Charging a reasonable fee, BJSM is one of the best fixed income funds which provides a feasible means to access an assorted pool of high-yield US bonds while mirroring the cycle of an individual bond.

AdvisorShares Peritus High Yield ETF (HYLD)
The primary objective and goal of the large, actively-managed AdvisorShares Peritus High Yield fixed income ETF is to create high levels of current income. This ETF’s secondary objective is to cause capital appreciation through high-yield debt securities. The AdvisorShares Peritus ETF essentially invests in a portfolio of stocks, loans, and junk bonds which has no incorporated integrated diversification necessity. Because of this, the ETF not only tilts, but its risks and yields are fluid, and the portfolio exposure can sometimes end up focusing on specific industries and sectors. One noteworthy tip: HYLD may own ETFs (inverse and leveraged funds included) to hedge its exposure or accomplish its goals. Challenges for this fund are that it is expensive with a large expense ratio, and it has weak onscreen liquidity.

VanEck Vectors Emerging Markets High Yield Bond ETF (HYEM)
This fund, with the ticker HYEM, tracks an index which measures the performance of corporate debt of sub-investment-grade being issued from emerging market economies. The fund holds high-yield debt denominated in American dollars and is issued in Europe or the US by companies and firms located in or looking to serve emerging markets. The HYEM fixed income ETF holds around 350 bonds issued by corporations from emerging market countries ranging from the Philippines to Brazil. The portfolio is, thus, less exposed to interest rate risk and has a lower yield than longer-dated portfolios. While the ETF trades okay, it has significant spreads, weak underlying liquidity, and has index lag and higher holdings costs.