ETF Focus

Defined-Maturity ETFs: Good Product, Bad Strategy?

Defined-maturity exchange-traded funds aim to make the traditional strategy of laddering bonds of different maturities easier and more accessible. But should investors be laddering at all?

Feb. 15, 2014 3:00 a.m. ET

For retirees hoping to sleep at night, "laddering" bonds ensures that each year a batch of individual bonds will mature, providing the income needed for that year. There's another option: defined-maturity bond ETFs, which resemble individual bonds right up to their distributions and maturity dates. But laddering with either ETFs or individual bonds brings its own set of trade-offs.

Defined-maturity ETFs are a different breed. Like other ETFs, they bundle together many bonds, except in this case the bonds are of...