One solution could be ETFs that hold diversified collections of income sources. Besides foreign and U.S. bonds, the funds own dividend-paying stocks from around the world. The diversified ETFs, which yield 4% to 5%, have proved relatively resilient in the past month. Solid choices include Guggenheim Multi-Asset Income ETF
A top performer is Guggenheim Multi-Asset Income, which yields 5.2%. The fund holds half a dozen different kinds of securities, including REITs and preferred shares -- which pay bond-like yields. The fund always keeps at least 50% of assets in dividend-paying stocks. Holdings include such blue chips as Verizon
In recent years, the Guggenheim ETF's diversified approach has paid dividends. When one asset slowed, others took the lead. Big rallies in REITs and MLPs lifted results. During the past five years, the fund returned 7.4% annually, compared to 5.8% for the S&P 500 and 5.4% for the Barclays Capital U.S. Aggregate. The Guggenheim fund also topped competitors that hold only dividend stocks, including iShares Dow Jones Select Dividend Index
The Guggenheim benchmark relies on a computerized model that aims to emphasize the most attractive assets. The system focuses on stocks with high yields, low prices, and earnings growth. As MLPs rallied in recent years, their allocation slipped because the shares had become rich.
The SPDR income allocation fund, which yields 4.0%, invests in a broad collection of ETFs. The portfolio recently had 18% of assets in SPDR Barclays Long Term Corporate Bond
To limit the impact of rising interest rates, the SPDR fund has been emphasizing bonds with lower credit qualities. Those can be relatively resilient during periods when Treasuries fall. If rates continue climbing, the portfolio managers can add bonds with shorter maturities. Short-term bonds tend to suffer limited losses during periods of climbing rates.
The iShares income ETF, which yields 5.1%, tracks the Morningstar Multi-Asset Income Index. The benchmark holds about 60% of assets in fixed income, 20% in equity, and 20% in alternative income sources, such as REITs and preferred shares. The portfolio invests in a collection of iShares ETFs. Recently the fund had 6% of assets in iShares High Dividend Equity
At the time of publication the author had no position in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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