Invesco created its BulletShares suite of exchange-traded funds (ETFs) to help investors build bond ladders — a strategy that involves buying bonds with staggered maturity dates. But these funds can be useful in other ways.
In 2022, when we added Invesco BulletShares 2026 Corporate Bond (BSCQ) to the Kiplinger ETF 20, the list of our favorite ETFs, the fund met our objective of finding a short-term, high-quality corporate bond fund with below-average duration (a measure of interest-rate sensitivity).
Since then, the fund has exceeded expectations. From mid-2022 through October, BulletShares 2026 Corporate Bond returned 4.3% annualized, beating the 3.1% gain of the Bloomberg U.S. Aggregate Bond Index, with half the volatility.
But as its name implies, all the bonds in the fund mature in 2026. That means as the IOUs it holds are paid off over the course of the year, the fund's portfolio will slowly morph from a short-term corporate debt fund into a cash fund.
Starting in July, says Justin Danfield, former senior fixed-income ETF strategist at Invesco, the fund will cease buying new bonds, and the fund's stakes in cash and 13-week Treasury bills will increase. Finally, sometime in mid-December 2026, the fund will close, and shareholders will receive a cash distribution of their shares.
What should investors do now?
If you hold shares in this fund, and you're using it primarily as a place to park short-term cash, you can stay put. Bear in mind, however, that the fund's yield, currently 4.0%, will start to shrink a bit starting in July, says Danfield.
T-bill yields, nearly 3.8% recently, are competitive with money market funds for now, but Danfield expects T-bill yields to fall as the Fed continues to lower short-term lending rates in 2026.
Otherwise, you could consider shifting assets in the BulletShares fund into one of the Kip ETF 20 core bond funds, the Fidelity Total Bond ETF (FBND) or the State Street DoubleLine Total Return Tactical ETF (TOTL). Meanwhile, we'll be assessing alternatives for the BulletShares fund in the coming months.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
