Exchange-traded funds have enjoyed a rapidly growing popularity throughout the investing public, except among one key group: investors who are wary of the risks associated with equity investments.

Because the universe of exchange-traded funds, or ETFs, is expanding, several new bond-based ETFs have come on the market. At the end of 2008, there were 60 ETFs tracking bond indexes, up from six in 2006.1

If you avoided ETFs because they were predominantly composed of stocks, the growing availability of bond ETFs might warrant a second look.

Bonding with the Stock Exchange An ETF is a portfolio of securities that is assembled by an investment company and sold in shares that trade like stock. The investment company holds the underlying securities in trust and sells ownership of them in shares. The underlying securities typically track an index, a sector, or a group of securities that share a common thread.

The value of an ETF