What You Need To Know About Rising Rate ETFs

Your bond portfolio plays an important role in diversification, income, and low volatility. In addition, it may be made up of several interlocking sectors, credit profiles, duration exposure, and fund managers that will adjust as conditions in the fixed-income market’s change.

Some investors may prefer simply reducing their core exposure to intermediate-duration bonds and moving to cash or a lower-duration equivalent in order to adapt to a rising rate environment. While you would forgo a higher income stream for a short period of time, it would allow you to preserve capital and look to redeploy when prices and/or yields appear more attractive.

The Bottom Line

No one knows what the future may bring with respect to interest rates and expected returns from bond funds. I am anticipating and prepared for the likelihood that we will experience very fast moves in both directions. As a result, investors that have adopted a trading mindset and quick feet, may ultimately achieve a profitable outcome from rising rate ETFs.

Nevertheless, I urge you to fully research and understand how these ETFs function before you add them to your portfolio. Taking the extra time to compare their impact on your existing positions and implement a risk management plan will also aid in your success.

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FMD Capital Management, its executives, and/or its clients may hold positions in the ETFs, mutual funds or any investment asset mentioned in this post. ...

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