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I'm thinking about moving my money to an automated management service. I've set my risk profile to 3.5 (low) which means they would invest around 35% in bond ETFs.

With today's interest rates being historically low, why would bond ETFs still be considered a low risk investment?

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In the strictest sense, there are bills,notes, and bonds, named when issued based on their time to maturity. Even though it's called a bond ETF it may have a duration short enough to be made of T-bills, less than a year to maturity.

Simply put, for bonds, risk comes from the duration, time to maturity.

  • Isn't there default risk too? – Ganesh Sittampalam Aug 7 '15 at 18:47
  • Yes. Given the very general nature of the question I was answering as if it were a U.S. Government bond ETF, in which case, we treat the default risk as near zero. – JoeTaxpayer Aug 7 '15 at 21:40
  • And for company bonds from the "credit grade"? – Jeaj Nov 1 '18 at 9:10

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