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ETFs Help Investors Navigate Changing Fixed-Income Landscape


Investors are worried about income generation and volatility in the equities market. However, ETFs can help investors diversify and augment yields in their portfolios.

According to a Guggenheim survey, 72% of respondents are concerned about the impact of fixed-income yields on their portfolios.

“Investors are looking for unique and innovative ways to find potential income given the volatile market and ETFs fill a void in an investor’s toolkit for a range of applications—from replacing gaps created by maturities or, called bonds to managing cash flow needs, and to customizing a portfolio’s duration profile,” William Belden, Managing Director, Product Development at Guggenheim Investments, said in a note.

Additionally, many of the surveyed investors are optimistic about the future of fixed income. About 29% of respondents like high yield, 27% like emerging markets and 25% like investment grade as areas for the most opportunity in a rising yield environment. [ETFs for Rising Rates]

“For investors looking to save for life events such as retirement, defined-maturity products could be attractive, given the current volatile economic environment,” Belden added. “With increasing education initiatives around ETFs, more advisors are looking to them as a potential investment vehicle to help their clients reach their investment goals.”

Investors can choose from a number of target-date ETFs provided by Guggenheim, BlackRock’s (BLK) iShares and Deutsche Bank (DB). [Guggenheim Lists More Target-Date BulletShares ETFs]

ETFs are touted as a tax efficient, low cost, transparent and easy-to-use investment vehicle. Around 49% of surveyed investors enjoy investing in fixed-income ETFs due to their diversification qualities – many bond ETFs are comprised of hundreds if not thousands of component securities, 18% like ETF’s tax efficiency and 13% point to ETF’s convenience.

“Not all fixed income products are created equal, and fixed income ETFs can offer investors a viable way to capture exposure to diversified, transparent and tax efficient investment vehicles,” Belden added. “With the ETF industry experiencing strong growth over the last several years, it will likely garner broader acceptance from the investment community.”

For more information on market volatility, visit our volatility category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.