Do buyers of bond ETFs need to pay for accrued interest?
No. Investors purchase ETFs' as they would any other stock, own it under the same circumstances as an equity investment, collecting distributions instead of dividends or interest. The ETF takes care of the internal operations (bond maturities and turnover, accrued interest, payment dates, etc.).
Bond ETFs are traded like normal stock.  It just so happens to be that the underlying fund (for which you own shares) is invested in bonds.  Such funds will typically own many bonds and have them laddered so that they are constantly maturing.  Such funds may also trade bonds on the OTC market. Note that with bond ETFs you're able to lose money as well as gain depending on the situation with the bond market.  The issuer of the bond does not need to default in order for this to happen.  The value of a bond (and thus the value of the bond fund which holds the bonds) is, much like a stock, determined based on factors like supply/demand, interest rates, credit ratings, news, etc. I let someone else pick and chose which junk bonds to buy and which to sell. So instead of holding individual bonds in my portfolio I hold an ETF that is managed by a man with a PHD and which buys junk bonds.   I get a yearly 15.5% ROI, paid monthly.  Buy and hold and you can get a good return for the rest of your life. It is only speculation when you sell. "The federal funds rate is one of the risk-free short-term rates in the economy. We often think of fixed income securities as paying this rate plus some premia associated with risk. For a treasury security, we can think this way: (interest rate) = (fed funds rate) + (term premium) The term premium is a bit extra the bond pays because if you hold a long term bond, you are exposed to interest rate risk, which is the risk that rates will generally rise after you buy, making your bond worth less.  The relation is more complex if people have expectations of future rate moves, but this is the general idea.  Anyway, generally speaking, longer term bonds are exposed to more interest rate risk, so they pay more, on average. For a corporate bond, we think this way: (interest rate) = (fed funds rate) + (term premium) + (default premium) where the default premium is some extra that the bond must pay to compensate the holder for default risk, which is the risk that the bond defaults or loses value as the company's prospects fall.  You can see that corporate and government bonds are affected the same way (approximately, this is all hand-waving) by changes in the fed funds rate. Now, that all refers to the rates on new bonds.  After a bond is issued, its value falls if rates rise because new bonds are relatively more attractive.  Its value rises if rates on new bonds falls.  So if there is an unexpected rise in the fed funds rate and you are holding a bond, you will be sad, especially if it is a long term bond (doesn't matter if it's corporate or government).  Ask yourself, though, whether an increase in fed funds will be unexpected at this point.  If the increase was expected, it will already be priced in.  Are you more of an expert than the folks on wall-street at predicting interest rate changes?  If not, it might not make sense to make decisions based on your belief about where rates are going.  Just saying. Brick points out that treasuries are tax advantaged.  That is, you don't have to pay state income tax on them (but you do pay federal). If you live in a state where this is true, this may matter to you a little bit. They also pay unnaturally little because they are convenient for use as a cash substitute in transactions and margining (""convenience yield"").  In general, treasuries just don't pay much.  Young folk like you tend to buy corporate bonds instead, so they can make money on the default and term premia." The expense ratio reduces the return of the ETF; your scenario of paying 100.0015 is that of a load.  Most (all?) ETFs can be bought without paying a load (sales charge as a percent of amount invested), and some ETFs can be bought without paying a brokerage fee (fixed or variable charge for a buy transaction just like buying any other stock  through the brokerage) because the brokerage has waived it.  Your broker  might charge fees for both buying and selling shares in an ETF, but in any case, this is quite separate from the expense ratio. "Just to confirm, you don't pay interest when holding a bond, the issuer of the bond pays you interest. The idea of calculating ""present value"" is as you suggest. You discount future payments using an appropriate rate. These future payments include both the coupon payments you receive through the life of the bond and the principal repayment at the maturity of the bond - each should be discounted from the due date of the payment to today's date. A typical rate to use would be the interest you yourself could earn by investing elsewhere (this gives you some idea of how much it would cost to get those payments another way), or perhaps some standard rate, for example the interbank rates such as LIBOR or FEDFUNDS." Dividends are not paid immediately upon reception from the companies owned by an ETF. In the case of SPY, they have been paid inconsistently but now presumably quarterly. I dont really understand how this would work. In stocks, you are buying a share in a company at a specific price that fluctuates with the value of the company. In bonds, you are lending money for a specific time period with the hopes of getting your money back plus interest. Is actual money going to be lent? Are there going to be different bond products for each company every time they issue new debt? It just doesn't seem practical to me. Usually the market.  I'm a company issuing a 5-year bond with 5% coupon payments. It goes on the market to whoever is willing to pay the most for it. The prices that those investors pay implies what the required yield is. For instance, if they're willing to pay exactly face value for the bond, then that shows they have a required return of (in this case) 5%. Paying more or less for the bond implies a require rate less than or greater than 5%, with the exact amounts derivable with basic algebra.  The same principle can be applied to any other asset. The key two things to consider when looking at similar/identical ETFs is the typical (or 'indicative') spread, and the trading volume and size of the ETF. Just like regular stocks, thinly traded ETF's often have quite large spreads between buy and sell: in the 1.5-2%+ range in some cases. This is a huge drain if you make a lot of transactions and can easily be a much larger concern than a relatively trivial difference in ongoing charges depending on your exact expected trading frequency. Poor spreads are also generally related to a lack of liquidity, and illiquid assets are usually the first to become heavily disconnected from the underlying in cases where the authorized participants (APs) face issues. In general with stock ETFs that trade very liquid markets this has historically not been much of an issue, as the creation/redemption mechanism on these types of assets is pretty robust: it's consequences on typical spread is much more important for the average retail investor. On point #3, no, this would create an arbitrage which an authorized participant would quickly take advantage of. Worth reading up about the creation and redemption mechanism (here is a good place to start) to understand the exact way this happens in ETFs as it's very key to how they work. Yes, just set aside the amount of money. If you buy a cfd long in a stock for a 1000$, set aside 1000$. If you buy a cfd short, set aside the same amount and include a stoploss at the value at which the money is depleted. In this case however, you can stil lose more, because of opening gaps. By doing this, you replicate the stock return, apart from the charged interest rate. This is literally the worst article ever.  First dividends are not guaranteed, and the higher the yield the higher the risk for a dividend paying stock. When buying a stock that pays dividends make sure they have the cash flows to cover it long term.  Utility stocks are interest rate sensitive. If we head into a period of high interest rates, utility stocks are going to underperform, if not get killed.  Exchange traded funds can be extremely risky, and some have much higher fees than mutual funds.  Variable Annuities should never be purchased unless you have exhausted all other tax deferred strategies, and then probably still to be avoided because of high fees.  Money markets and CDs aren't really investments. They're a cash alternatives that May not keep up with inflation. stocks represent ownership in a company. their price can go up or down depending on how much profit the company makes (or is expected to make).  stocks owners are sometimes paid money by the company if the company has extra cash.  these payments are called dividends. bonds represent a debt that a company owes.  when you buy a bond, then the company owes that debt to you.  typically, the company will pay a small amount of money on a regular basis to the bond owner, then a large lump some at some point in the future. assuming the company does not file bankrupcy, and you keep the bond until it becomes worthless, then you know exactly how much money you will get from buying a bond. because bonds have a fixed payout (assuming no bankrupcy), they tend to have lower average returns.  on the other hand, while stocks have a higher average return, some stocks never return any money. in the usa, stocks and bonds can be purchased through a brokerage account. examples are etrade, tradeking, or robinhood.com.   before purchasing stocks or bonds, you should probably learn a great deal more about other investment concepts such as: diversification, volatility, interest rates, inflation risk, capital gains taxes, (in the usa: ira's, 401k's, the mortgage interest deduction).  at the very least, you will need to decide if you want to buy stocks inside an ira or in a regular brokerage account. you will also probably want to buy a low-expense ration etf (e.g. an index fund etf) unless you feel confident in some other choice. "The answer is yes. And the reason is if today's interest rates are lower than the interest rate (coupon) at which the bond was issued. The bond's ""lifetime value"" is 100 cents on the dollar. That's the principal repayment that the investor will get on the maturity date. But suppose the bond's coupon rate is 4% while today's interest rate is 3%. Then, people who bought the bond at 100 would get 4% on their money, while everyone else was getting 3%. To compensate, a three year bond would have to rise to almost 103 so that the so-called yield to maturity"" would be 3%. Then there would be a ""capital loss"" (from almost 103 to 100) that would exactly offset the extra interest, that is 1% ""more"" for three years. If today's interest rates are negative (as they were from time to time in the 1930s, and in the present decade), the ""negative"" interest rates will prevent the buyer from getting the ""lifetime value"" (as defined by the OP) of principal plus interest over the original life of the bond. This happens in a ""flight to quality"" situation, where people are willing to take a (small) capital loss on Treasuries in order to prevent a large possible loss from bank failures like those that took place in 2008." "Repurchase agreements are a way of financing a security position. You have a collateralized loan where you give your security in exchange for cash. Let's say you have a 10 year Treasury note paying 3.5% while the 1-week repurchase rate is 0.5%. You loan the security to someone with a promise to repurchase it from them some time in the future. You  collect the 3.5% coupon and you pay the 0.5% interest. Clearly it makes no sense for someone to collect interest on money and also collect coupon payments. And for the counter-party it makes no sense to be not getting coupon payments and also to be paying interest. This how one website explains the process: During the transaction, any coupon payments that come due belong to   the legal owner, the ""borrower."" However, when this happens, a cash   amount equal to the coupon is paid to the original owner, this is   called ""manufactured payment."" In order to avoid the tax payment on   the coupon, some institutions will repo the security to a tax exempt   entity and receive the manufactured payment and avoid the tax (""coupon   washing"") I find this unequivocal description to be the clearest During the life of the transaction the market risk and the credit risk   of the collateral remain with the seller. (Because he has agreed to   repurchase the asset for an agreed sum of money at maturity). Provided   the trade is correctly documented if the collateral has a coupon   payment during the life of the repo the buyer is obliged to pay this   to the seller." You cannot do a 1031 exchange with stocks, bonds, mutual funds, or ETFs.  There really isn't much difference between an ETF and its equivalent index mutual fund. Both will have minimal capital gains distributions. I would not recommend selling an index mutual fund and taking a short-term capital gain just to buy the equivalent ETF.