There are limited options for individual investors to invest in bonds directly. XTBs bonds allow retail investors direct exposure to some fixed income options on the ASX. However the list of bonds and liquidity is quite limited (or even non existent). Real Estate Investment Trust which invest in real estate also provide a regular regular of income. REIT Index Fund allows investors to invest in a portfolio of REITs.
Fixed Income ETFs or Bond ETFs allow self managed super funds or individuals direct exposure to a low cost liquid portfolio of bonds. Typical fees for the funds are less than 0.40% a year.
Not all investment yields are the same. Income from bond index funds are a result of credit risk and return while income from dividend ETFs like VHY ETF are based on equity returns.
Not all fixed income exchange traded funds are created the same. There are different kind of bonds from:
1. Government Bond ETF – These funds invest in only government bonds only (GOVT, RGB, VGB). The different exchange traded fund owns bonds in particular section term structure of the interest rate curve. Within these funds there are also government fixed income funds that focus only on inflation linked government bond (ILB)
2. Corporate Fixed Income ETF – Listed fixed income funds invest in corporate bonds (RCB)
3. Semi Government – Semi government entities are companies that has implicit backing by government due to government ownership. Semi government bonds are usually infrastructure and utility bonds. (RSM)
4. Diversified Bond ETF portfolio includes bonds across all sub sector of the fixed income asset class.
Bond ETF List
|Russell Australian Select Corp Bd ETF||RCB|
|SPDR S&P/ASX Australian Govt Bd ETF||GOVT|
|Russell Australian Government Bond ETF||RGB|
|Vanguard Australian Government Bond ETF||VGB|
|SPDR S&P/ASX Australian Bond ETF||BOND|
|iShares Composite Bond||IAF|
|Vanguard Australian Fixed Interest ETF||VAF|
|iShares Government Inflation||ILB|
|Russell Australian Semi-Govt Bd ETF||RSM|