Alternative Income Ideas for Today’s Modern Portfolios
This article was originally published on ETFTrends.com.
As advisors rethink how they plan to adapt to the changing conditions after a three-decade bull run in the fixed-income space, many are expanding their investment portfolios with bond exchange traded fund strategies to limit risks and generate yields.
On March 14, 2018, ETF Trends will be hosting its annual Virtual Summit, an online virtual conference environment where financial advisors can learn about current ETF issues, hear from industry experts and connect with peers without the burden of cost and traveling.
On panel titled, Alternative Income Ideas for Today’s Modern Portfolios, Fran Rodilosso, Head of Fixed Income ETF Portfolio Management for VanEck, Jordan Farris, Managing Director, Head of ETF Product Development for NuShares from Nuveen, and Chuck Martin, Portfolio Manager for AGFiQ, will review the fixed-income market and provide insights into potential alternative income-generating strategies to diversify yields for the environment ahead.
2018 ETF Trends Virtual Summit returns Wednesday, March 14! Earn 5 CE Credit – click to register!
For example, the VanEck Vectors Investment Grade Floating Rate (FLTR) may act an alternative to traditional cash instruments. The fund provides exposure to the that have a so-called reset period with interest rates tied to a benchmark, such as the Fed funds, LIBOR, prime rate or U.S. Treasury bill rate. Due to their short reset periods, these floating rate funds have relatively low rate risk.
In a shifting interest rate environment, with the Federal Reserve eyeing a tighter monetary policy ahead, fixed-income ETF investors have to adapt to the changing market and look beyond the potential short-comings of traditional benchmarks like the Bloomberg Barclays U.S. Aggregate Bond Index, or so-called Agg.
The NuShares Enhanced Yield U.S. Aggregate Bond ETF (NUAG) may help fixed-income investors take an alternative approach to bond investing as the enhanced Index does not weight components by market capitalization, instead opting to assign components into a variety of categories based upon asset class, sector, credit quality and maturity. The smart beta indexing methodology then utilizes a rules-based process to include higher weights to categories with higher yields while maintaining risk and credit quality at levels similar to the Base Index.
Investors may also look to equity strategies as a way to augment their income needs. For example, the Hedged Dividend Income ETF (DIVA) , which tracks the INDXX Hedged Dividend Income Index, is designed to deliver to investors a strong current yield capital appreciation potential with a risk profile similar to a corporate bond index.
The fund holds 100 equally weighted securities within the universe of the largest 1000 US stocks that have paid consistent or growing dividends and which have the highest dividend yields. Additionally, the fund shorts approximately 150 to 200 stocks, within the same universe, that have the lowest-to-no dividend history and low yields. Due to its indexing methodology, investors may find higher yields than dividend stocks while potentially hedging against volatility of equity markets.
2018 ETF Trends Virtual Summit returns Wednesday, March 14! Earn 5 CE Credit – click to register!
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