BulletShares® fixed income ETFs

I’m Jason Bloom at Invesco and I oversee the Fixed Income and Alternatives ETF Product Strategy team.

I’m going to walk you through how BulletShares ETFs can make it easier to build bond ladders.

But first, what are bond ladders?

What are bond ladders?

Bond ladders are portfolios of bonds with sequential maturity dates. As bonds in the ladder mature, the proceeds can be used to cover a specific need—such as a college tuition payment or an upcoming tax bill—or the proceeds can be invested in new bonds with longer maturities. This periodic reinvestment from maturing bonds to longer duration bonds is why it’s called a “ladder”—and each maturity year represents a rung in the bond ladder.

Now that we understand the basics of bond ladders, let’s cover the potential benefits and how they can help investors.

What are the potential benefits of bond ladders?

Bond ladders offer three main potential benefits:

• They can produce a steady, predictable income stream.
• Ladders allow you to customize your portfolio’s maturity and duration profiles—or sensitivity to interest rate changes.
• And BulletShares’ hold-to-maturity feature can insulate investors from the effect of changing interest rates during an investor’s holding period. As such, bond ladders can provide potential advantages in both rising and falling interest rate environments.

Let’s explore the third benefit a bit more.

If interest rates increase, an investor can reinvest any proceeds from maturing bonds at higher future interest rates.

If interest rates decrease, an investor need only reinvest a portion of their laddered portfolio during a low rate phase of the interest rate cycle.

How can BulletShares ETFs make building bond ladders easier

BulletShares defined maturity ETFs make bond laddering easy because they combine the benefits of individual bonds and exchange-traded funds.

Like individual bonds, BulletShares offer monthly income potential and a final distribution at maturity, as well as control of portfolio maturity, yield, and credit quality. And because they’re ETFs, BulletShares can offer improved diversification, liquidity, transparency, convenience, and cost.

BulletShares ETFs                                           

BulletShares offer designated years of maturity and cover investment-grade corporate bonds, high-yield corporate bonds, and municipal bonds.

Whatever you’re looking to accomplish with your bond portfolio, BulletShares offer convenient, cost-effective solutions to help meet your income goals in 2023 and beyond.

1. Diversification does not guarantee a profit or eliminate the risk of loss.
2. ETFs disclose their full portfolio holdings daily.
3. Since ordinary brokerage commissions apply for each buy and sell transaction, frequent trading activity may increase the cost of ETFs.

BulletShares ETFs

There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short-selling and margin maintenance requirements. Ordinary brokerage commissions apply. The funds’ return may not match the return of the underlying index. The funds are subject to certain other risks. Please see the current prospectus for more information regarding the risk associated with an investment in the funds.

Investments focused in a particular sector are subject to greater risk, and are more greatly impacted by market volatility, than more diversified investments.

The funds are non-diversified and may experience greater volatility than a more diversified investment.

Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa.

During the final year of the funds’ operations, as the bonds mature and the portfolio transitions to cash and cash equivalents, the funds’ yield will generally tend to move toward the yield of cash and cash equivalents and thus may be lower than the yields of the bonds previously held by the funds and/or bonds in the market.

If interest rates fall, it is possible that issuers of callable securities will call or prepay their securities before maturity, causing the funds to reinvest proceeds in securities bearing lower interest rates and reducing the funds’ income and distributions.

An issuer may be unable or unwilling to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating.

Income generated from the funds is based primarily on prevailing interest rates, which can vary widely over the short- and long-term. If interest rates drop, the funds’ income may drop as well. During periods of rising interest rates, an issuer may exercise its right to pay principal on an obligation later than expected, resulting in a decrease in the value of the obligation and in a decline in the funds’ income.

An issuer’s ability to prepay principal prior to maturity can limit the funds’ potential gains. Prepayments may require the funds to replace the loan or debt security with a lower yielding security, adversely affecting the funds’ yield.

The funds currently intend to effect creations and redemptions principally for cash, rather than principally in-kind because of the nature of the funds’ investments. As such, investments in the funds may be less tax-efficient than investments in ETFs that create and redeem in-kind.

Unlike a direct investment in bonds, the funds’ income distributions will vary over time and the breakdown of returns between fund distributions and liquidation proceeds are not predictable at the time of investment. For example, at times the funds may make distributions at a greater (or lesser) rate than the coupon payments received, which will result in the funds returning a lesser (or greater) amount on liquidation than would otherwise be the case. The rate of fund distribution payments may affect the tax characterization of returns, and the amount received as liquidation proceeds upon fund termination may result in a gain or loss for tax purposes.

During periods of reduced market liquidity or in the absence of readily available market quotations for the holdings of the fund, the ability of the fund to value its holdings becomes more difficult and the judgment of the sub-adviser may play a greater role in the valuation of the fund’s holdings due to reduced availability of reliable objective pricing data.

The funds’ use of a representative sampling approach will result in its holding a smaller number of securities than are in the underlying Index, and may be subject to greater volatility.

The Fund may invest in privately issued securities, including 144A securities which are restricted (i.e. not publicly traded). The liquidity market for Rule 144A securities may vary, as a result, delay or difficulty in selling such securities may result in a loss to the Fund.

Before investing, investors should carefully read the prospectus/summary prospectus and carefully consider the investment objectives, risks, charges and expenses. For this and more complete information about the fund call 800-983-0903 or visit invesco.com for the prospectus/summary prospectus.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

Shares are not individually redeemable and owners of the Shares may acquire those Shares from the fund and tender those Shares for redemption to the fund in Creation Unit aggregations only, typically consisting of 100,000 or 150,000 Shares.

Invesco Distributors, Inc      NA2701213                     1/23