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Guggenheim BulletShares 2014 High Yield Corporate Bond ETF

You can get high yields plus your money back at a preset termination date.

If you buy a bond and hold it to maturity, in most cases you’ll get back your principal, plus interest payments. But what happens when you buy an exchange-traded fund that invests in junk bonds and has a fixed maturity date, just like a regular bond?

Guggenheim BulletShares 2014 High Yield Corporate Bond ETF (symbol BSJE) and nine similar Guggenheim vehicles are a blend of ETF and target-date fund. Like many bond funds, they pay dividends monthly. But unlike most funds, these ETFs have fixed life spans: The 2014 fund tracks an index that seeks to replicate the performance of a port­folio of junk bonds that mature on December 31, 2014. On that date, the ETF will “terminate,” as Guggenheim’s Bill Belden puts it. Investors will get the net asset value per share as of the market close, and the fund will fold.

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The index, which is managed by Accretive Asset Management, can invest in foreign bonds, but as of late February, 93% of its assets were invested in bonds issued by U.S. companies. When one of the ETF’s bonds matures, the proceeds are used to add to the remaining holdings. After July 2014, proceeds from matured bonds will be held in cash or in Treasuries in preparation for the fund’s termination.

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With an actual bond, of course, you know how much you’ll get back at maturity. With the Guggenheim ETFs, what you get at “maturity” will depend on the performance of the funds’ junk bond holdings.

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