When asking yourself what is the best fixed income ETF, you’ll want to zero in on the most promising ETFs that can help strike the perfect balance of maximizing returns while minimizing risk. In this challenging environment, a few choice funds stand out from the pack.
We applied a few criteria, such as the ETF level of diversification, total assets, duration, liquidity, and of course yield, to pick the 5 best fixed income ETF to buy in 2024.
List of the best fixes income ETFs in 2024:
BNDX offers a diversified international bond portfolio with a competitive yield of 4.85% and a low expense ratio of 0.07%.
IDV targets high-dividend-yielding stocks from developed non-U.S. markets with a current 30-day SEC yield of approximately 5.9%.
SCHD features a low expense ratio of 0.06%, a five-year annualized return of 11.6%, and a focus on consistent dividend payouts.
SPAB is ideal for cost-conscious investors with a very low expense ratio of 0.03% and a diverse portfolio primarily consisting of U.S. Treasuries and investment-grade bonds.
VYM provides a cost-effective income-generating option with an expense ratio of 0.06% and a 30-day SEC yield of 2.8%.
1. Vanguard Total International Bond ETF (BNDX)
The Vanguard Total International Bond ETF (BNDX) offers a conveniently thorough global bond portfolio at an expense ratio of 0.07%. This ETF is a cost-effective way to tap into the international bond market.
With over 6,800 international bonds in its portfolio, BNDX provides remarkable exposure to both developed and emerging markets. This broad diversification across multiple regions and bond types helps to balance returns while mitigating risk. Additionally, BNDX delivers a competitive yield of 4.85%, which appeals particularly to income-oriented investors.
The fund employs a hedging strategy to protect against U.S. dollar fluctuations, so that currency risks are minimized for investors. This means your investments are more insulated from potential global currency swings, something we’ve been seeing a lot of lately.
Over the five-year period, BNDX has recorded a return of -0.37% as of June 2024, a performance that might seem unremarkable, but it is actually better than it looks considering the overall recession we’ve seen in the economy in recent years.
Given its diverse portfolio, competitive yield, and cautious approach to currency risks, BDNX is an excellent choice for investors seeking to add stability and breadth to their fixed income investments. It’s particularly suitable for those looking to avoid the complexity of managing numerous international bonds individually.
2. iShares International Select Dividend ETF (IDV)
The iShares International Select Dividend ETF (IDV) targets high-dividend-yielding stocks from developed non-U.S. markets. This ETF is particularly attractive if you prioritize consistent income generation, as it consistently yields a robust income stream. As of its latest data, the 30-day SEC yield stands at around 5.9%, much higher than many other dividend-focused ETFs.
Also, IDV’s competitive expense ratio of 0.51% is appealing to investors who are cost-conscious. Over the past five years, the ETF has demonstrated a stable track record, with an annualized return of approximately 4.7%. This steady capital appreciation enhances its potential and provides a safeguard for investors who value long-term stability.
The IDV’s diversified portfolio guarantees exposure to various sectors while focusing on companies with a strong history of dividend payments. This strategic focus on dividend payers helps minimize risk for income-focused investors.
Integrating IDV into your portfolio lets you diversify your income streams across international markets, which is (or should be) an essential consideration for those looking to spread risk and enhance overall returns.
Related: Blackrock (iShares) vs Vanguard: Which is better?
3. Schwab U.S. Dividend Equity ETF (SCHD)
The Schwab U.S. Dividend Equity ETF (SCHD) is an attractive option that offers a unique blend of high-dividend stocks within the U.S. market and tracking the Dow Jones U.S. Dividend 100 Index. This ETF stands out due to its exceptionally low expense ratio of 0.06%, so it’s a very affordable choice.
As you consider SCHD for your portfolio, bear in mind that it boasts an impressive five-year annualized return of 11.6%. Additionally, the total assets managed by the fund exceed $54 billion, a truly ridiculous number that showcases its widespread popularity and confidence the investors have in this ETF.
For income-seeking investors, SCHD’s focus on companies known for their consistent dividend payouts makes it particularly appealing. With this ETF, you can tap into the steady cash flow that those dividend leaders generate.
Given its strong historical performance and low costs, the Schwab U.S. Dividend Equity ETF (SCHD) is certainly worth considering for 2024. It provides a cost-efficient way to gain broad exposure to U.S. dividend stocks and would be a valuable component in your investment strategy.
4. SPDR Portfolio Aggregate Bond ETF (SPAB)
The SPDR Portfolio Aggregate Bond ETF (SPAB) stands out for its low-cost and diversified bond exposure. This ETF offers a cost-effective way to gain exposure to a broad range of bonds, and is also a great monthly dividend ETF, if getting paid monthly is important to you.
If you add the lowest expense ratio on this list of only 0.03%, you quickly realize it’s a particularly attractive option if your main goal is to minimize costs.
SPAB primarily invests in U.S. Treasuries and other investment-grade bonds, so it’s a solid foundation for your fixed income portfolio. Approximately 40% of its portfolio is allocated to government bonds, which provides a strong anchor in your investment mix.
The fund serves as a core building block, designed to track the performance of the Bloomberg U.S. Aggregate Bond Index. This index is a widely followed benchmark in the bond market and it offers significant diversification and liquidity benefits.
As of the latest data, SPAB provides a yield of approximately 5.10%. In a way, it's reflecting the current interest rate environment and bond market dynamics. With total assets of around $7.8 billion, you get significant liquidity and trading volume, allowing you to enter and exit the fund easily.
The SPDR Portfolio Aggregate Bond ETF is a solid choice for those looking to shore up their fixed income exposure in 2024.
5. Vanguard High Dividend Yield ETF (VYM)
Yes, we know we already had Vanguard, but there are so many great Vanguard ETFs that we simply had to include two. Vanguard High Dividend Yield (VYM) is a large-cap value ETF. VYM primarily focuses on companies with a strong history of paying dividends.
One of the more cost-effective options, VYM boasts an expense ratio of just 0.06%, mirroring Schwab U.S. Dividend Equity ETF in that regard. This low cost, combined with a 30-day SEC yield of 2.8%, highlights the ETF’s ability to generate income efficiently.
Over a five-year period, VYM has consistently delivered strong performance, with an very impressive annualized return of 9.9%. This is attributed to the fund’s diversified portfolio of over 342 holdings, which spans across various sectors.
Investing in VYM lets you benefit from exposure to a broad range of dividend-paying companies without hefty management fees. Also, VYM’s low expense ratio guarantees that more of your returns are retained, rather than being absorbed by fees.
This makes the ETF particularly suitable for long-term investors and those seeking steady income. You can balance your portfolio and generate consistent returns.
The bottom line
You’ve got your sights set on the best fixed income ETFs in 2024. In a market where bond prices have taken a hit, finding the right mix of safety and high yield can be tricky, but is all the more essential for it.
Each ETF on our list is a solid pick, but they’re not all the same. Which one would be perfect for you? That is something we can’t say. What we can say is that, when thinking how many ETF should you own, 5 falls right in that sweet spot, so there’s no reason you have to pick only one of the ETFs from this list.