Bond ETFs (DALL·E)
We’ve been updating the RSA Retail Bonds Savings rates which are a great product for those looking for medium to long-term income solution (and rates will likely go up at the end of May, perhaps as much as 1%). But the problem her his that they are not enabled for tax-free investing so we thought, bond ETFs.
Listed bond ETFs that provide income and they can be included into your tax-free account.
Important is that, these ETFs are buying bonds in the secondary market and hence you may experience capital loss. But they will generate a good income stream and if held for the long-term the risk of capital loss is very low. Furthermore the yields will change as the local government bond yields change. So the current yield is merely a guideline.
Remember that the interest these bond ETFs pay is taxable as income outside of a tax-free account.
This list is not comprehensive; I only mention ETFs with high yields, some offshore bond ETFs are paying a few percent – not very thrilling. Payments are quarterly.
1nvest ICE US Treasury Short Bond Index Feeder ETF (JSE code: ETFUSD) TER 0.28%
Yield ±6%
They’ve only paid one dividend so yield is a projection. Investing into short dated US treasuries, this is all about income earned in US$ and paid in rands.
1nvest SA Bond (JSE code: ETFBND) TER 0.29%
Yield ±10.9%
Focusing on local bonds, with maturities of over one year, an attractive yield.
CoreShares Wealth GOVI (JSE code: CSGOVI) TER 0.25%
Yield ±11.0%
Tracks the local government bond index, there are a few tracking this index.
CoreShares Income AMETF (JSE code: INCOME) TER 0.44%
Yield ±9.5%
Only just listed, this offers a good yield and holds a mix of different income assets both local and offshore.
NOTE. So far it seems that local brokers are not enabling this ETF for tax-free. There is no reason why not and I have poked my broker to include it ASAP.
FNB Government Inflation-Linked Bond (JSE code: FNBINF) TER 0.36%
Yield ±2.9%
Another ETF that has a few issuers, and here your capital increases by inflation and then a yield is paid. SO lower yield, but increasing capital keeping up with inflation.
Satrix GOVI (JSE code: STGVI) TER 0.32%
Yield ±10.8%
This is one of the old Absa ETFs that transferred over to Satrix. Tracking the local bond index offering great yield.
Satrix ILBI (JSE code: STXILB) TER 0.25%
Yield ±2.5%
Another inflation linked. Again capital increases by inflation and the income is paid out in cash.
Satrix SA Bond Portfolio (JSE code: STXGOV) TER 0.25%
Yield ±11.0%
Another tracking local bond index and paying out every quarter.
This is a long list of the best bond ETFs for tax-free investing. But remember, don’t just chase yield. Make sure it fits within your overall investment strategy.
Simon Brown
ETF blog
At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.