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‘FLTR’ ETF an Effective Countermove for Rising Rates

This article was originally published on ETFTrends.com.

Investors are caught in the midst of a raging bull market that was even more evident in the Department of Commerce showing that gross domestic product grew by a revised 4.2% in the second quarter, giving the Federal Reserve more fodder to raise rates this month. With rate hikes on the horizon, fixed-income investors must be able to counter effectively and one way is through an ETF that invests in floating rate notes, such as the VanEck Vectors Investment Grd Fl Rt ETF (FLTR) .

With two rate hikes already experienced through the first two quarters of 2018 and the prevailing sentiment circulating within the capital markets that more is to come, bond investors can incorporate fixed-income ETFs into their portfolios that can adjust with rising rates. This floating rate component gives investors adaptability in the current economic environs where rising rates are prevalent by taking advantage of these short-term rate adjustments rather than earning a fixed return.

“The bottom line is that the economy remains on a solid growth path and still appears to have the potential to remain on a positive track for some time to come,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

Source: tradingeconomics.com

Related: An ETF That Taps Into Closed-End Funds for High Yields

Investment-Grade Debt Issues

One distinct advantage of FLTR is that the fund allocates capital into debt issues that are of investment-grade as opposed to debt that may offer higher yields, but expose investors to more credit risk. Taking a look at its latest holdings, FLTR holds debt from recognizable bank names, such as Morgan Stanley, Citigroup and Wells Fargo.

'FLTR' ETF an Effective Countermove for Rising Rates

FLTR also diversifies its debt holdings with investments in companies domiciled in other parts of the world, such as the United Kingdom, Switzerland, Japan, Germany, Australia, Sweden, and the Netherlands.

FLTR seeks to replicate the price and yield performance of the MVIS® US Investment Grade Floating Rate Index, which is comprised of U.S. dollar-denominated floating rate notes issued by corporate entities or similar commercial entities that are public reporting companies in the United States and rated investment grade. Based on Yahoo! Finance numbers, FLTR has been able to generate 1.35% year-to-date and 2.45% within the past year.

For more news on rising rates, visit the Rising Rates Channel.