How to Protect Against Rates and Earn Good Income

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How to Protect Against Rates and Earn Good Income

(New York)

With all the newfound reticence of the Fed, one important fact remains-they could hike at any time. The Fed was hawkish for a long time, and as dovish as they have suddenly become, a position shift on rates could be quick. Accordingly, when considering income-focused investments, advisors need to be very mindful about rate risk. One way to earn good income while also hedging against rates is to look at short term bond funds. Zero and short duration bond funds have little to no rate/duration risk, which means they can earn income without the threat of big losses coming from movements in rates and yields. Some funds to consider are the ProShares Interest rate hedge family or the Fidelity Limited Term Bond ( FJRLX ), the latter of which yields 2.89% and has a duration of 2.4 years.

FINSUM : Short-term yields have come up so much that limited term bond funds now look like a great buy for stable income without so much capital risk.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


Referenced Symbols: FJRLX

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