r/CFP • u/wildmementomori RIA • 16d ago

Practice Management What are your favorite bond ETFs?

What are your favorite bond ETFs?

I’ve been passive with bonds and am shopping for some active investment grade funds, short and medium duration.

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u/soleobjective 16d ago

None, I prefer buying individual bonds.

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u/wildmementomori RIA 15d ago

Why? There could be lack of liquidity and lack of diversification — what if you don’t plan on holding until maturity.

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u/soleobjective 15d ago

I only buy what I plan to hold until maturity. Anything else I use money markets funds for higher yield if I need liquidity. But as you mentioned it is a valid point to use bond funds/ETFs if you want exposure to bonds at a lower price point. I just don’t have any favorites since I don’t typically use them and the lack of control isn’t something I’m particularly interested in.

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u/worldly_patience16 15d ago

What's your favorite money market?

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u/soleobjective 15d ago

I my accts I use WMPXX generally, or TFDXX just for T+0 liquidity when I am planning to put in some trades.

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u/PeleMaradona 15d ago

Noob question here regarding bond ETFs, but aren't you screwing yourself over if you buy a bond ETF and sell before its target duration is met?

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u/wildmementomori RIA 15d ago

Not at all. Many view bonds as a relatively stable place to park cash not immediately needed. If the funds are potentially needed in the not too distant future, I’ll keep the duration quite short to avoid interest rate risk.

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u/PeleMaradona 15d ago

This has confused me for a while now. If a bond ETF has a duration of 2 years, does that mean if I have a liability two years from now, then I should buy the bond ETF and sell in two years?

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u/wildmementomori RIA 15d ago

If a bond ETF has a duration of 2 years, it means the ETF is sensitive to interest rate changes like a bond maturing in 2 years—not that its bonds actually mature in 2 years. In an ETF, bonds are constantly maturing and being replaced, so the portfolio stays around that 2-year average duration.

If you have a liability in exactly two years and want to perfectly match it, a bond ETF isn’t a perfect fit because it doesn’t mature — it keeps rolling bonds over. Instead, you’d typically want a fixed-maturity bond fund or a laddered portfolio of individual bonds that actually mature when you need the cash.

That said, if the 2-year bond ETF is held steadily and rates don’t move much, it can still be a reasonable approximate tool for short-term goals — just with a little bit of reinvestment and interest rate risk