How ASX investors can use the BOND ETF
The name’s… the SPDR BOND ETF. BOND invests in Australian bonds which are investment grade and denominated in Australian dollars with maturities more than one year.
Given how difficult it can be for small investors to get exposure to the market, an investor could use the BOND ETF to get exposure to the local bond market. High-grade bonds are typically used for their diversification/risk and income-producing impacts on a portfolio.
The BOND ETF is yet to reach scale
The SPDR BOND ETF had $40.31 million of money invested when we last pulled the monthly numbers. With a funds under management (FUM) or ‘market cap’ figure of less than $100 million, it’s important to consider if this ETF is still too small.
We say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least). This is because if an ETF is too small, it may not be sustainable for an ETF issuer/provider, such as SPDR, to continue to operate it.
That said, there are exceptions to this rule of thumb, especially if the ETF issuer is committed to growing the ETF’s FUM to the point where it becomes profitable.
BOND ETF fees explained
SPDR charges investors a yearly management fee of 0.24% for the BOND ETF. This means that if you invested $2,000 in BOND for a full year, you could expect to pay management fees of around $4.80.
For context, the average management fee (MER) of all ETFs covered by Best ETFs Australia on our complete list of ASX ETFs is 0.5% or around $10.00 per $2,000 invested. Keep in mind, small changes in fees can make a big difference after 10 or 20 years.
Putting it all together
If you’re weighing up investing in BOND, keep in mind that this is just a brief introduction to the ETF. To supercharge your research, take a look at our free SPDR BOND report. Then, consider searching our complete list of ASX ETFs for similar ETFs in the Fixed interest – Australia sector to compare your options.
