Fixed-income ASX ETFs are all the rage. Here are the top 5 performers

We reveal the best 5 fixed-income ASX ETFs for total returns in the year to 31 August.

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Fixed-income ASX exchange-traded funds (ETFs) have become particularly popular with investors over the past 12 months, new data reveals.

So, what's the appeal?

Let's investigate.

Why are investors loving fixed-income ASX ETFs this year?

ASX ETFs, which provide exposure to a basket of assets, have been popular for a number of years now.

Their key benefit is providing instant diversification in a single trade.

There are many types of ETFs covering many different asset classes.

One of those asset classes is bonds, and this is what fixed-income ETFs are all about.

A fixed-income ASX ETF gives investors exposure to a diversified basket of bonds.

A bond is like a tiny slice of a large loan pie.

They are used by corporations and governments as a way to borrow funds from many investors for a specified period.

During that period, they promise to pay interest at a set rate, before returning the capital to the investors in full at the end of the specified period.

Bonds typically pay a higher rate of interest than savings accounts. That's how organisations attract investors. If they didn't pay a higher rate, then conservative investors would just leave their cash in the bank.

Say you buy a 10-year bond with a coupon or interest rate of 5%, and it costs you $10,000.

You'll then receive your coupon payments periodically — usually twice per year — and in 10 years' time, you'll get your $10,000 back.

You can also sell your bonds during that 10-year period if their market value goes up.

Bonds are considered a safe-haven asset for investors in times of economic uncertainty, like now.

Bond prices tend not to fluctuate as much as share prices, and the coupon payments provide a predictable passive income stream.

Buying a fixed-income ASX ETF gives investors exposure to a bunch of bonds, thereby spreading the risk.

New ASX data reveals the best-performing fixed-income ETFs for total returns over the year to 31 August.

The top 5 fixed-income ASX ETFs

According to the data, here are the top five fixed-income ASX ETFs today:

The VanEck Australian Subordinated Debt ETF (ASX: SUBD) has delivered a 6.34% total return over the past 12 months. This includes reinvested dividends with a historical yield of 4.62%.

The iShares Government Inflation ETF (ASX: ILB) has delivered a 5.44% total return over the past 12 months. This includes reinvested dividends with a historical yield of 1.02%.

The BetaShares Australian Investment Grade Corp Bond ETF (ASX: CRED) has delivered a 5.15% total return over the past 12 months. This includes reinvested dividends with a historical yield of 4.57%.

The Betashares Australian Major Bank Hybrids Index ETF (ASX: BHYB) has delivered a 5.14% total return over the past 12 months. This includes reinvested dividends with a historical yield of 4.58%.

The iShares Global High Yield Bond (AUD Hedged) ETF (ASX: IHHY) has delivered a 5.02% total return over the past 12 months. This includes reinvested dividends with a historical yield of 4.11%.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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