Bond exchange-traded funds (ETFs) make it easy to invest in many bonds at once, building a diversified portfolio to reduce the risk you face if a particular bond issuer defaults. If you’re looking to invest in a bond ETF, these are the best ones—listed in no particular order—to consider in 2022. We built this list by looking at and comparing a few factors, including the minimum investment required, the expense ratio and other fees charged by the fund, as well as the fund’s historical returns, trade volume, and dividends. This means the fund gives you exposure to a variety of government bonds, high-grade corporate, and other types of bonds. If you’re looking for a single ETF to make up the bond portion of your portfolio, this is one of the most diversified options out there. With more than $317 billion in assets, liquidity won’t be an issue for this fund. It’s also incredibly cheap, charging an expense ratio of just 0.035%, equivalent to just 35 cents for every $1,000 you invest.

Short-Term Bonds: SPDR SSGA Ultra Short Term Bond ETF

3-year return (as of Dec. 15, 2021): 1.68%Expense ratio: 0.20%Assets under management (AUM as of Dec. 15, 2021): $438.3 millionInception date: Oct. 9, 2013

One of the primary types of risk that bond investors face is interest rate risk. If rates rise, bond values tend to fall because investors can buy newer bonds with better rates. A short-term bond fund, like the SPDR SSGA Ultra Short Term Bond ETF, reduces that risk by focusing only on buying bonds that have very short maturities. The interest on the bonds—and, therefore, the return—will be lower, but this reduces the risk of losing money in a rising rate environment. This fund has just $438 million under management, making it the smallest ETF on this list, but that should be sufficient to maintain liquidity for investors. The fund is also relatively cheap, charging an expense ratio of 0.20%, or $2 per $1,000 invested.

Inflation-Protected Bonds: Vanguard Short-Term Inflation-Protected Securities ETF

3-year return (as of Dec. 15, 2021): 4.56%Expense ratio: 0.05%Assets under management (AUM as of Dec. 15, 2021): $58.2 billionInception date: Oct. 12, 2012

Inflation risk is another major risk that bond investors face. If inflation rises, the interest you earn may not be enough to maintain your investment’s purchasing power, meaning you’re losing value overall. Inflation-protected bonds include a mechanism to increase their interest rate when inflation rises. This fund focuses on buying U.S. government inflation-protected bonds with terms of five years or fewer. This provides a reasonable rate of return with additional protection, should inflation spike. With more than $58 billion in assets, the fund is highly liquid. The expense ratio of 0.05%, equivalent to just 50 cents for every $1,000 invested, also makes this fund very cheap to invest in.

Mortgage-Backed Securities: Vanguard Mortgage-Backed Securities ETF

3-year return (as of Dec. 15, 2021): 3.68%Expense ratio: 0.04%Assets under management (AUM as of Dec. 15, 2021): $16.9 billionInception date: Nov. 19, 2009

Mortgage-backed securities (MBS) are bonds secured by real estate loans, such as mortgages. These securities are popular because they often provide monthly interest payments instead of semiannual ones. Vanguard Mortgage-Backed Securities ETF focuses on MBS backed by government agencies like Ginnie Mae, Fannie Mae, and Freddie Mac. The MBS in the fund’s portfolio have maturities ranging from three to 10 years, giving them a moderate level of interest-rate risk. The fund has nearly $17 billion in assets, meaning investors won’t have to worry about liquidity. The expense ratio is quite low at 0.04%, equal to 40 cents for every $1,000 invested.

Municipal Bonds: iShares National Muni Bond ETF

3-year return (as of Dec. 15, 2021): 4.71%Expense ratio: 0.07%Assets under management (AUM as of Dec. 15, 2021): $24.5 billionInception date: Sept. 7, 2007

Municipal bonds are issued by state and local governments. For example, a city might issue a municipal bond to pay for infrastructure improvements or other projects. The advantage of municipal bonds is that investors’ returns are typically exempt from federal income tax, making them popular for investors looking to reduce their tax burden. The iShares National Muni Bond ETF invests in more than 2,000 municipal bonds from state and local governments around the U.S., aiming to generate tax-free income for investors. The fund has more than $24 billion in assets, so investors should have no issues buying or selling shares when they want to. It’s also inexpensive to invest in, with an expense ratio of 0.07%—equal to 70 cents for each $1,000 invested.

Corporate Bonds: Vanguard Intermediate-Term Corporate Bond ETF

3-year return (as of Dec. 15, 2021): 7.44%Expense ratio: 0.04%Assets under management (AUM as of Dec. 15, 2021): $49.4 billionInception date: Nov. 19, 2009

Vanguard’s Intermediate-Term Corporate Bond ETF focuses on investing in highly rated corporate bonds with maturities ranging from five to 10 years. This lets the fund provide a reasonable level of income while maintaining acceptable levels of risk. The fund has almost $50 billion in assets, making it highly liquid. It also has a very low expense ratio of 0.04%, equivalent to 40 cents for every $1,000 invested.

International Bonds: Vanguard Total International Bond ETF

3-year return (as of Dec. 15, 2021): 4.04%Expense ratio: 0.08%Assets under management (AUM as of Dec. 15, 2021): $119.2 billionInception date: May 31, 2013

Governments and other organizations around the world issue bonds. If you want to buy bonds from countries outside of the U.S., the Vanguard Total International Bond ETF is an all-in-one fund that fits that bill. This ETF focuses on highly rated bonds, primarily from Europe and the Pacific. It has relatively little exposure to emerging markets and other regions like the Middle East. The majority of the bonds in its portfolio are highly rated at A or above, meaning there is low default risk. With almost $120 billion in assets, the fund is large enough that investors won’t struggle to buy or sell shares. It’s also inexpensive, with an expense ratio of 0.08%, equivalent to 80 cents for each $1,000 invested.

Emerging Markets: VanEck EM High Yield Bond ETF

3-year return (as of Dec. 15, 2021): 5.52%Expense ratio: 0.40%Assets under management (AUM as of Dec. 15, 2021): $1.3 billionInception date: May 8, 2012

If you want to invest in international bonds with a focus on emerging markets rather than developed ones, the VanEck EM High Yield Bond ETF is a solid choice. Emerging market bonds tend to be lower-rated than bonds from developed markets, but they also pay higher interest rates. This fund primarily invested in bonds rated BB and B. This is one of the smaller funds on our list, with just $1.3 billion in assets. However, that should be enough to ensure liquidity for investors buying and selling shares. It’s also one of the more expensive funds but is still relatively cheap overall with an expense ratio of 0.40%. This is equivalent to $4 for every $1,000 invested.

Junk Bonds: SPDR Portfolio High Yield Bond ETF

3-year return (as of Dec. 15, 2021): 7.71%Expense ratio: 0.10%Assets under management (AUM as of Dec. 15, 2021): $564.5 millionInception date: June 18, 2012

One of the drawbacks of highly rated bonds is that they tend to pay relatively low amounts of interest. Some bond investors prefer to accept a bit more risk in return for higher interest rates on their bonds. The SPDR Portfolio High Yield Bond ETF focuses on junk bonds—those rated below BBB. These bonds tend to offer higher overall returns in exchange for a greater level of default risk. The majority of this ETF is invested in BB bonds, with some B and CCC or lower-rated bonds, as well. With $564 million in assets, this is the second-smallest fund on our list, but it’s still large enough to maintain liquidity for investors. It’s also relatively low-cost with an expense ratio of 0.10%, equivalent to $1 for every $1,000 invested.

Pros and Cons of Investing in Bond ETFs

Pros Explained

Less risk than stock ETFs: Investors often turn to bonds because, compared with stocks, they are good for reducing volatility and risk.Provide a source of income for investors: Bonds offer regular interest payments, and bond ETFs often pass that income on to investors, making bond ETFs an option for income-focused investors.Easy diversification: ETFs make it easy for investors to invest in hundreds or thousands of securities at once, simplifying the process of building a diversified portfolio.

Cons Explained

Lower returns than stock ETFs: In return for their reduced risk, bonds and bond ETFs usually offer lower long-term returns than stocks.Interest-rate risk: Bonds and bond ETFs fare poorly when interest rates rise. In today’s low-rate environment, many investors feel that interest rates are likely to increase, which poses a risk to bond investors.

Since 1926, a portfolio that is fully invested in fixed-income securities like bonds has returned an average of 5.33%, compared with an average return of 10.29% for a 100%-equity portfolio. In recent years, though, bonds have performed adequately despite low rates. Most of the funds on this list, with the exception of short-term bonds, have returned more than 4%. The lower-than-historical-average returns are understandable, given today’s low-rate environment.

Is a Bond ETF Right for Me?

Bond ETFs are a good choice for investors who want to diversify their portfolios by adding some fixed-income investments alongside their equity investments. They’re also good for investors who want to produce income from their portfolios.

The Bottom Line

Bond ETFs give investors a way to reduce risk and volatility in their portfolios and produce income. There are many types of bonds to choose from, each with different characteristics. If you’re looking to add bonds to your portfolio, these nine funds are some of the best ways to do so. The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.