Defined Maturity ETFs: A Strategy for a Changing Rate Environment
What is a defined maturity ETF and what does it mean to you? In this webinar you will learn about defined maturity ETFs and how they can help simplify fixed income investing. Defined maturity ETFs combine the precision of individual bonds with the flexibility and cost efficiency of ETFs. Through these vehicles, investors can customize their fixed income portfolios to suit financial planning goals and can help manage the effects of changing market interest rates.
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ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.
Investing in bonds involves risk, including interest rate risk, inflation risk, credit and default risk, call risk, and liquidity risk.
Individual bond investors do not have to pay the annual expense of ETFs, and individual bond investors generally have greater control of the credit quality and maturity date of the bonds that they choose to invest in.
In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. The municipal market is volatile and can be significantly affected by adverse tax, legislative, or political changes and the financial condition of the issuers of municipal securities. Unlike individual debt securities, which typically pay principal at maturity, the value of an investment in the fund will fluctuate. As the fund approaches its liquidation date, the fund's securities will mature, and the fund may reinvest the proceeds in money market securities with lower yields than the securities previously held by the fund. An investment in money market securities is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The amount of the fund's income distributions will vary over time, the breakdown of returns between fund distributions and liquidation proceeds will not be predictable at the time of investment, and you may experience a gain or loss for tax purposes. To fully benefit from the funds' expected decline in price volatility, investors should consider holding the funds to a defined end date. Otherwise they may experience more price (NAV) uncertainty. A portion of fund distributions may be subject to state or federal income taxes, AMT, or taxable as capital gains. Principal invested is not guaranteed at any time, including at or after the fund's target date. Leverage can increase market exposure and magnify investment risk.
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