Money market exchange-traded funds (ETFs)are a necessary part of many investors' portfolios because they provide safety and preservation of capital in a turbulent market. These funds generally invest in high-quality and very liquid short-term debt instruments such as U.S. Treasury bonds and commercial paper, which don't usually provide significant income.
While money marketETFs invest the majority of their funds in either cash equivalents or highly-rated securities with very short-term maturities, some may invest a portion of their assets in longer-term or lower-rated securities. Investors should understand those securities present higher risks.
Although all investments pose some risks, the following money market ETFsare a relatively safe option for investors:
- iShares Short Treasury Bond ETF (SHV)
- BlackRock Short Maturity Bond ETF (NEAR)
- SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL)
- Invesco Ultra Short Duration ETF (GSY)
Read on to find out more about these investments. The information provided here is updated as of May 11, 2021.
Key Takeaways
- Money market ETFs are a necessary part of many investors' portfolios because they provide safety and preservation of capital in a turbulent market.
- TheseETFs invest the majority of their funds in cash equivalents and securities with very short-term maturities, while others invest some of their assets in longer-term securities.
- Four ETFsthat provide safe options are iShares Short Treasury Bond ETF, BlackRock Short Maturity Bond ETF, SPDR Bloomberg Barclays 1-3 Month T-Bill ETF, and Invesco Ultra Short Duration ETF.
iShares Short Treasury Bond ETF
The iShares Short Treasury Bond ETF trades on the Nasdaq and invests in the shortest end of the yield curve by focusing on U.S. Treasury bonds that have between one month and one year until maturity. The fund takes very little credit risk or interest rate risk and, therefore, generally delivers very low returns. The ETF's average annual return rate since its inception in 2007 is 0.99%. But it's a very safe fund in which to park assets during turbulent markets.
The fund has 39 holdings, investing about 52% of its $14.9 billion net assets in U.S. Treasury securities. The remaining 48% is invested in cash and/or derivatives. All of the fund's bond investments have the highest bond rating of AAA. The ETF has a low expense ratio of 0.15%.
As of July 2016, the ETF began tracking the ICE Short U.S. Treasury Securities Index. It has been underperforming its benchmark with a one-year return of -0.01% compared to 0.11% for the index.
BlackRock Short Maturity Bond ETF
The BlackRock Short Maturity Bond ETF invests the majority of its assets in investment-grade, fixed-income securities with an average duration that is generally less than one year. The fund is actively managed, which means it does not attempt to match the performance of an index.
Of the fund's $4.7 billion net assets, 15.2% of its assets are in cash and 10.7% are in asset-backed securities. Approximately 24% of the fund's bonds receive AAA ratings, about 6% receive AA ratings, and about 32.5% garner A ratings. The remaining bonds receive BBB or BB ratings.
The top five holdings in the ETF are:
- BLK Treasury Fund
- Tri-Party Goldman Sachs & Co, LLC
- Charter Communications Operating LLC
- FordF_19-3 A2
- Bayer US Finance LLC
This ETF has a net expense ratio of 0.25%.
SPDR Bloomberg Barclays 1-3 Month T-Bill ETF
SPDR Bloomberg Barclays 1-3 Month T-Bill ETF seeks to track the performance of theBloomberg 1-3 Month U.S. Treasury Bill Index and is traded on the NYSE Arca Exchange. The fund invests in the shortest end of the yield curve and focuses on zero-coupon U.S. Treasury securities with remaining maturities between one and three months. It takes very little credit or rate risk and, therefore, seeks to deliver safe returns. Because of the short duration of the investments in its portfolio, the ETF is rebalanced at the end of the month.
Investors should not expect high yields from the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF. Since its inception in 2007, the fund has generated an average annual return of 0.76%. However, the fund may be a reasonable investment option during volatile markets. Keep in mind that even very short-duration investments carry market risks, especially when short-term interest rates are volatile.
The fund has $12billion in net assets, with more than $28 million invested in cash. The fund's expense ratio of 0.14%.
Invesco Ultra Short Duration ETF
The InvescoUltra Short Duration ETF attempts to maximize current income, preserve capital, and maintain liquidity for investors. The fund is actively managed and invests at least 80% of total assets in fixed-income securities. It seeks to outperform the ICE Bank of America-Merrill Lynch U.S. Treasury Bill Index. As of April 30, 2021, it received an overall rating of four stars from Morningstar out of 198 funds.
This ETF holds securities with averagedurations of less than a year, including U.S. Treasuries, corporate bonds, and high-yield bonds. The high-yield portion may boost returns but may also slightly increase the risk of the fund. But the short-term duration of the high-yield holdings may mitigateits risk.
The fund's slightly riskier portfolio has generated slightly above-average returns relative to other ETF money market funds. The fund generated one-year returns of 0.12%, three-year returns of 1.5%, and five-year returns of 1.2%. The fund had $3.02 billion in net assets and a total expense ratio of 0.22%, which is higher than the average money market fund.
FAQs
Four ETFs that provide safe options are iShares Short Treasury Bond ETF, BlackRock Short Maturity Bond ETF, SPDR Bloomberg Barclays 1-3 Month T-Bill ETF, and Invesco Ultra Short Duration ETF.
Which funds are used for capital preservation? ›
Capital preservation securities include:
- High-yield savings accounts.
- Treasury bills.
- Municipal bonds.
- U.S. savings bonds.
- Certificates of deposits (CDs)
- Target-date funds.
- Annuities.
U.S. Treasury bonds are widely considered the safest investments on earth. Because the United States government has never defaulted on its debt, investors see U.S. Treasuries as highly secure investment vehicles.
What are the top 3 ETFs? ›
7 best long-term ETFs to buy and hold:
- SPDR S&P 500 ETF Trust (SPY)
- iShares Core S&P Small-Cap ETF (IJR)
- Vanguard Mid-Cap ETF (VO)
- Vanguard FTSE Developed Markets ETF (VEA)
- Vanguard FTSE Emerging Markets ETF (VWO)
- Vanguard Total World Stock ETF (VT)
- iShares Core U.S. Aggregate Bond ETF (AGG)
Best ETFs to Invest In For Long Term
- Vanguard Dividend Appreciation Index Fund (NYSE:VIG) ...
- Vanguard Total Stock Market Index Fund (NYSE:VTI) ...
- Schwab U.S. Small-Cap ETF (NYSE:SCHA) ...
- iShares Core S&P Mid-Cap ETF (NYSE:IJH) ...
- Vanguard Real Estate Index Fund (NYSE:VNQ)
The fund seeks to achieve its objective by diversifying among high-credit-quality investments and investment contracts that are structured to smooth market gains and losses over time.
What is smart capital preservation fund? ›
The SMART Capital Preservation Fund (the "Fund") is a plan investment option that seeks to provide interest income consistent with prevailing market and interest rate conditions, principal stability, capital preservation, and liquidity for participant activity.
What is the safest investment with the highest return? ›
9 Safe Investments With the Highest Returns
- Certificates of Deposit.
- Money Market Accounts.
- Treasury Bonds.
- Treasury Inflation-Protected Securities.
- Municipal Bonds.
- Corporate Bonds.
- S&P 500 Index Fund/ETF.
- Dividend Stocks.
Key Takeaways
- Preservation of capital is a conservative investment strategy where the primary goal is to preserve capital and prevent loss in a portfolio.
- Capital preservation strategies necessitate investing in the safest short-term instruments, such as Treasury bills and certificates of deposit.
5 Key Wealth Preservation Strategies
- Incorporate risk management into your financial plan. ...
- Implement an investment strategy that protects your assets. ...
- Develop a philanthropic strategy. ...
- Plan to pass your wealth down to future generations. ...
- Create a business succession plan.
The 7 best value ETFs to buy and hold in 2022:
- Vanguard Value ETF (VTV)
- Vanguard S&P Small-Cap 600 Value ETF (VIOV)
- iShares Russell 2000 Value ETF (IWN)
- Avantis U.S. Small Cap Value ETF (AVUV)
- Invesco S&P 500 Pure Value ETF (RPV)
- Vanguard Russell 1000 Value ETF (VONV)
- iShares MSCI USA Value Factor ETF (VLUE)
100 Highest 5 Year ETF Returns
| Symbol | Name | 5-Year Return |
|---|
| IWF | iShares Russell 1000 Growth ETF | 102.29% |
| MGK | Vanguard Mega Cap Growth ETF | 101.55% |
| QTEC | First Trust NASDAQ-100 Technology Sector Index Fund | 98.60% |
| SPYG | SPDR Portfolio S&P 500 Growth ETF | 98.25% |
92 more rowsThis semiconductor ETF from BlackRock's iShares, one of the largest creators of ETFs, was up nearly 1.000% from its lows in 2011 to its highs in 2021, making it the best performing ETF over the last 10 years.
Can you beat the market with ETFs? ›
There are three simple (but not always easy) approaches investors can use to beat the market with individual stocks and ETFs: Buy individual stocks and ETFs that beat the market. Buy levered long ETFs in bull markets. Buy inverse (short) ETFs in bear markets (or at least exit stocks).
Are ETFs good for long term investing? ›
ETFs can be great building blocks for long-term investors. They can provide broad exposure to market sectors, geographies, and industries and help investors quickly diversify their portfolios and reducing their overall risk profile. The best long-term ETFs provide this exposure for a relatively low expense ratio.
Which Vanguard ETF has the highest return? ›
1. Total Stock Market ETF (VTI)
- Expense Ratio: 0.03%
- One-Year Return: -3.31%
- Five-Year Return: 12.97%
- 10-Year Return: 13.25%
- Risk Potential: 4.
Are Capital Preservation Funds Safe? Generally, capital preservation funds are chosen because they're considered safe, short-term investments.
Which is better Vanguard Wellington or Wellesley? ›
The primary difference between the funds is the amount of bonds held. Wellington is around 40% bonds while Wellesley is 60%. There has been discussions over which is the better fund for retirees who are making withdrawals from their portfolios.
What is the safest bond fund at Vanguard? ›
Best Vanguard Bond Funds to Buy
- Vanguard Total Bond Market ETF (BND) ...
- Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ...
- Vanguard Long-Term Treasury ETF (VGLT) ...
- Vanguard Intermediate-Term Corporate Bond ETF (VCIT) ...
- Vanguard Tax-Exempt Bond ETF (VTEB) ...
- Vanguard Mortgage-Backed Securities ETF (VMBS)
The Capital Preservation Account is a market value separate account of MassMutual® “wrapped” by a general account guarantee to pay a stated rate of return and provide book value transfers and distributions.
Vanguard Short-Term Corporate Bond ETF (VCSH, $77.74) is a low-risk index bond exchange-traded fund that offers investors a healthy yield of 3.6%.
What is a 457 smart plan? ›
The Massachusetts Deferred Compensation 457 SMART Plan is a retirement savings program available for Commonwealth of Massachusetts state and municipal employees. Eligible employees can save and invest before-tax and after-tax dollars through salary deferrals into our wide array of low fee investments options.
Where can I get 5% interest on my money? ›
Here are the best 5% interest savings accounts you can open today:
- Current: 4% up to $6,000.
- Aspiration: 3-5% up to $10,000.
- NetSpend: 5% up to $1,000.
- Digital Federal Credit Union: 6.17% up to $1,000.
- Blue Federal Credit Union: 5% up to $1,000.
- Mango Money: 6% up to $2,500.
- Landmark Credit Union: 7.50% up to $500.
You can mix and match these investments to suit your income needs and risk tolerance.
- Immediate Fixed Annuities. ...
- Systematic Withdrawals. ...
- Buy Bonds. ...
- Dividend-Paying Stocks. ...
- Life Insurance. ...
- Home Equity. ...
- Income-Producing Property. ...
- Real Estate Investment Trusts (REITs)
Generally speaking, if you're estimating how much your stock-market investment will return over time, we suggest using an average annual return of 6% and understanding that you'll experience down years as well as up years.
How can we preserve capital in a recession? ›
Household goods and other necessities are also considered recession-friendly investments. It would be rash to move your entire portfolio in this direction, but adding a utilities or consumer staples index fund or exchange-traded fund can add stability to your portfolio even if the economy starts to feel uncertain.
Do bonds preserve capital? ›
Because they are less vulnerable to steep drawdowns than riskier assets, bonds may help investors preserve capital.
What type of investment would preserve capital investment but seek capital appreciation? ›
Conservative Capital Growth- Mutual funds that stress preservation of capital and current income but also seek some capital appreciation are called balanced funds.
How do rich people preserve wealth? ›
These are the assets the wealthy invest in to preserve what they have:
- Exclusive real estate. When people talk about "exclusive real estate, they mean real estate that doesn't hit the market often. ...
- Fine art. ...
- Rare coins. ...
- Gold. ...
- Usable precious metals.
Investing Only in Intangible Assets
Ultra-wealthy individuals invest in such assets as private and commercial real estate, land, gold, and even artwork. Real estate continues to be a popular asset class in their portfolios to balance out the volatility of stocks.
ETFs are very safe and are an excellent option for long-term investments. According to experts, ETFs are not that volatile and show a slight change in their prices compared to stocks and indices because they are diversified and pooled investments of many investors.
What ETFs do well in a bear market? ›
Results
| Category | Fund (Symbol) | Average Prior Bear Mkt. Performance |
|---|
| Utilities | Utilities Select Sector SPDR (XLU)* | -40.7% |
| Technology | Vanguard Information Technology (VGT) | -42.6% |
| Energy | Energy Select Sector SPDR® (XLE)* | -44.3% |
| Large Blend | SPDR S&P 500 ETF Trust (SPY) | -46.6%* |
18 more rowsJun 29, 2022
7 best ETFs to buy now:
- Invesco Dynamic Energy Exploration & Production ETF (PXE)
- iShares Global Energy ETF (IXC)
- Aberdeen Standard Bloomberg All Commodity Strategy K-1 Free ETF (BCI)
- iShares MSCI Brazil ETF (EWZ)
- Vanguard Value ETF (VTV)
- Vanguard Mega-Cap Growth ETF (MGK)
- Vanguard Short-Term Bond ETF (BSV)
Best Overall: Vanguard Total Stock Market ETF
Some investors choose to build a simple, two-fund portfolio using this fund and a bond fund, letting them set their allocation between stocks and bonds easily.
How many ETFs should I own? ›
For most personal investors, an optimal number of ETFs to hold would be 5 to 10 across asset classes, geographies, and other characteristics. Thereby allowing a certain degree of diversification while keeping things simple.
What are the best performing ETFs this year? ›
Best Performing ETFs Of The Year
| Ticker | Fund | YTD Rtn |
|---|
| KMLM | KFA Mount Lucas Index Strategy ETF | +31.36% |
| RISR | FolioBeyond Rising Rates ETF | +30.92% |
| RYE | Invesco S&P 500 Equal Weight Energy ETF | +30.63% |
| VDE | Vanguard Energy ETF | +30.47% |
20 more rowsJul 5, 2022
Best Index Funds
- DSP Nifty 50 Equal Weight Index Fund Direct Growth. ...
- ICICI Prudential S&P BSE Sensex Index Fund Direct Growth. ...
- IDFC Nifty 50 Index Fund Direct Plan Growth. ...
- ICICI Prudential Nifty 50 Index Plan Direct Growth. ...
- Taurus Nifty 50 Index Fund-Direct Plan-Growth Option. ...
- Sundaram Nifty 100 Equal Wgt Dir Gr.
Top 100 Highest Dividend Yield ETFs
| Symbol | Name | Dividend Yield |
|---|
| GTO | Invesco Total Return Bond ETF | 7.96% |
| JEPI | JPMorgan Equity Premium Income ETF | 7.95% |
| IAUF | iShares Gold Strategy ETF | 7.85% |
| SDIV | Global X SuperDividend ETF | 7.76% |
92 more rowsThe main difference between index funds and ETFs is that index funds can only be traded at the end of the trading day whereas ETFs can be traded throughout the day. ETFs may also have lower minimum investments and be more tax-efficient than most index funds.
Is QQQ a good long term investment? ›
But since the Nasdaq 100 owns all large Nasdaq stocks, there is no judgment in what goes in and what comes out each year. A better performer: Perhaps most importantly, the Nasdaq 100 blows away the Dow in terms of gains. QQQ stock returned 13.6% annually over the past 15 years, which includes dividends.
Invesco S&P 500 Low Volatility ETF
One of the most popular types of ETFs for a bear market is low-volatility funds. The objective is pretty straightforward: Invest in stocks with low volatility, which in a down market should limit downside.
What is capital preservation? ›
Preservation of capital is a conservative investment strategy where the primary goal is to preserve capital and prevent loss in a portfolio. Capital preservation strategies necessitate investing in the safest short-term instruments, such as Treasury bills and certificates of deposit.
What is a capital preservation account? ›
The Capital Preservation Account is a market value separate account of MassMutual® “wrapped” by a general account guarantee to pay a stated rate of return and provide book value transfers and distributions.
Do bonds preserve capital? ›
Because they are less vulnerable to steep drawdowns than riskier assets, bonds may help investors preserve capital.
How do you protect capital? ›
What must you do to protect your capital?
- Minimise your exposure to negatively yielding assets after inflation and focus on real assets, including equities and real estate.
- Increase your investment horizon.
- Ignore short-term portfolio fluctuations induced by mark-to-market volatility and political noise.
