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Has anyone used iShares Target Date iBond ETFs to build their bond ladder? If so, I’d love to know your experience as I start to consider my own ladder.
Here is how iShares describes this product: “iBonds exchange-traded funds (“ETFs”) are an innovative suite of bond funds that hold a diversified portfolio of bonds with similar maturity dates. Each ETF provides regular interest payments and distributes a final payout in its stated maturity year, similar to traditional bond laddering strategies. However, the funds’ unique structure is designed to help investors easily build bond ladders with only a handful of funds.”
The expense ratios on the iBond Target Date Maturity ETFs range from 7 basis points for U.S. Treasuries; 10 bps for TIPS, Municipals, & Investment Grade Corporate; and 35 bps for the “High Yield & Income Corporate” ETF.
7 – 10 bps seems extremely reasonable for the increased diversification and professional purchasing/management of iBonds. Anyone care to comment?
Howard, your comments and experience using the Investment Grade Corporate iBond is exactly what I was looking for. Thank you!
Paul, the TIPS iBond has an expense ratio of .1%, or 10 bps. I’m not sure how to answer your specific question, though. Here’s a recent Morningstar article that may be helpful, discussing the use of iBonds to build a TIPS ladder: https://www.morningstar.com/portfolios/how-use-tips-your-portfolio
For others, iBonds are not solely a TIPS product. As my original post indicates, there are 5 distinct ETFs in the “iBond family.” https://www.ishares.com/us/strategies/bond-etfs/build-better-bond-ladders
This piece might be useful: Let’s look at the new iShares Defined-Maturity TIPS ETFs | Treasury Inflation-Protected Securities
Trying to understand buying iShare iBond TIPS compare to US TIPS.
If I build a 10 year TIPS bond ladder today (7/25) for yearly inflation income using tipsladder.com for $100,000 I would cost me $925,329.
How would I do the same thing using iShares (TIPS) IBIB through IBIL to generate $100,000 of inflation income.
What would it cost me using iShares iBond TIPS?
I have two ladders using IShares Target Date ETFs: one in my taxable account and one in an IRA. Both are in the Investment Grade Corporate series. The reason I chose them is because I am not comfortable analyzing an individual bond. I assume Blackrock has people who do this for a living. And, if I’m not going to hold many bonds, I am concerned about lack of diversification. I also assume that if I am buying 1 bond, I will pay the maximum spread, whereas when Blackrock buys bonds, I assume they pay the minimum spread.
The ETF option provides me with a diversified mix of bonds maturing at a specific date. In building a ladder, I know that each step of the ladder will mature on the same date each year.
One comment below said they can lose money. Well, yes, they are ETFs so the price can fluctuate each day. But the portfolio is purchased and held to maturity. Just like an individual bond, the bonds held will mature at their face value, which may be higher or lower than your purchase price. How is this different than buying an individual bond? If they are traded before maturity, they can lose money too.
I’m also not concerned about paying 10 basis points in expenses in exchange for a diversified portfolio that I don’t have to select. I suspect if I were doing the buying, much of the fee would be eaten up in the transaction costs.
One risk I have read about is “declining yield risk”, which the prospectus defines as: “During the six months prior to the Fund’s
planned termination date, the Fund’s yield will generally tend to
move toward prevailing money market rates and may be lower
than the yields of the bonds previously held by the Fund and lower
than prevailing yields for bonds in the market.” Basically, as the bonds start to mature, the proceeds get reinvested in the money market. This was a concern particularly when money market rates were close to zero. It seems like it is less of a risk now and as long as rates stay reasonable. The way to counteract this risk is to sell the ETF six months before maturity and purchase the next rung in the ladder with the proceeds.
I don’t claim to be an expert, but it seems like many of the comments to this post are overly negative about a useful product.
Your contribution is much appreciated.
However, I’m having some difficulty understanding why you compared different iShares products before concluding that “many of the comments to this post are overly negative about a useful product.” You mentioned the Investment Grade Corporate series, while others in the thread were referring to U.S. Treasuries (such as IBTF and LDRT). In my view, these are not the same products, despite the name of iShares iBonds. I agree with the others that BlackRock’s marketing was at fault, especially by labeling LDRT as a “target date” ETF when it does not have a target date—it keeps rolling on, hence very high liquidity risk.
Your post did help deepen my understanding of the bond market. I don’t mean to sound like an expert or a teacher, but I have learned that bond investments are diverse and vastly different than equity investments: they are selected based on 7 risk factors:
Default risk: practically zero for US Treasuries, applicable to corporations
Duration risk: minimal on short-term, higher on long-term bonds
Interest rate risk: depending on the Fed on short end, on market on long end
Inflation risk: loss of purchasing power, even with TIPS
Liquidity risk: not a problem for Treasuries, concerning for others
Call risk: depending on callable feature and coupon rate
Reinvestment risk: future availability is uncertain
These risks vary widely across bond types—Treasuries, corporates, munis, agencies, and high yield—and define entirely different markets.
I value our shared interest. But sometimes, we find ourselves divided by a common language.
My response was written to the original author who asked if anyone used the target date product. I don’t believe he specified only the treasury product. I agree there is a difference between a treasury product and a corporate product. I was reflecting on why I use the corporate product, hopefully to offer him my perspective.
Your list of risks illustrates why I see the value of the corporate I Shares ETFs for a bond ladder:
Default risk: As an example, IBDR, the 2026 ETF, holds 650 bonds. Yes, some could default, but the odds of losing more than a couple seems tiny. If I bought one bond and it defaulted, I would be out 100%.
Duration risk: I think many people are building ladders like mine: from 1 to 5 years. So, my duration risk is minimal.
Interest rate risk: Similar to anyone buying an individual bond. On purchase, you can see the yield to maturity to know where you stand if you hold to maturity, as you should plan to do if you build a ladder.
Inflation risk: loss of purchasing power is part of buying bonds. I don’t see a point in comparing them to stocks (or real estate or gold or anything else). Once you decide to buy bonds, you are in for the risk of inflation.
Liquidity risk: An ETF can be sold any day that the market is open. If there is a financial crisis, the liquidity of any part of the bond market could be called into question. If investors stop buying bonds, I don’t see how these are any less liquid than individual bonds. And, liquidity doesn’t matter if you are holding to maturity.
Call risk: I don’t know how Blackrock is managing this, but they are either buying non-callable bonds or their team is replacing bonds that are called with replacements. With 650 bonds, it shouldn’t be a big factor.
Reinvestment risk: IShares currently offers 11 corporate target date ETFs from 2025 – 2035. It is hard to imagine they won’t introduce 2036 when the time comes. When one target date is reached, there will be another ETF to invest the proceeds… it all comes down to whether the price and interest rate at the time is acceptable to you.
The point of building a bond ladder is to minimize reinvestment risk, interest rate risk, duration risk and inflation risk. If you are reinvesting at a particularly bad time for the bond market, only one rung of the ladder is exposed.
In my portfolio, these are not an alternative to stocks. They are part of my short term cash portfolio along side CDs, treasury bills, and money market funds.
Why do any of these risks suggest these ETFs are not a useful product to someone who wants to build an easy bond ladder?
These can lose money. For example $10,000 of IBTF purchased in 2019 fell to $8,800 low in 2022 and has not yet fully recovered. I’m unsure of the point of owning.
I don’t use iShares iBonds but I am curious.
One example I studied – LDRT iShares iBonds 1-5 yr Treasuries Ladder
1 unknown number and maturity dates of the treasuries – diversified? not sure.
2 Tiny daily trading volume (888 on 7/23/25) – very illiquid if less than 50,000
3 Interest rate risk, especially maturity date is beyond 2 years
4 expense ratio is too high – I have zero fee options
I am sure this ETF is suitable for some investors. It’s not for me.
Liquidity prior to the maturity date is not typically an issue with a target date bond ETF like this. You buy it to mature when you need the money.
LDRT ETF does not have a maturity date!
I use them. My first holding will mature end of this year.
You caught my interest for a minute until I realized that iBonds don’t hold I Bonds.
Yep. This is so obviously confusing naming that there had to have been a discussion(s) about it at BlackRock, and yet they still did it. 😒
On the surface using the term could be confusing, but Black Rock’s official terms are iShares, iBonds…
One would have to be an extremely poor investor if they didn’t look below the surface and be confused. They should be using a financial advisor if they are so incurious in their investigation into the funds they are considering purchasing.
I agree anyone investing should be looking under the hood, but I still find it a poor choice of name. Anyway it appears BlackRock would agree with you.
It just occurred to me that some readers probably misunderstood your phrase “I still find it a poor choice” as referring to the ETF offering itself as poor choice. I interpreted it as “poor naming choice”
Yes, I meant a poor naming, and I’ve edited to be clear. Thanks for mentioning it.