Why Retirees Are Turning to ETFs for $1 Million Goal
June 15th, 2013 at 7:11am by Tom Lydon
As we scramble to put enough away for life after work, most Americans have not amassed enough to live comfortably in their Golden years, but exchange traded funds can help investors realize their goal.
“We’re facing a crisis right now, and it’s going to get worse,” Alicia Munnell, director of the Center for Retirement Research at Boston College, said in a New York Times article. “Most people haven’t saved nearly enough, not even people who have put away $1 million.”
Conventional financial advice points investors toward fixed-income assets as people approach retirement. Investors are also currently stuck in a low yield environment. However, rates are expected to rise, but this is not necessarily a good thing for fixed-income portfolios. For instance, the climb in yields on the 10-year Treasury has generated the largest monthly bond market loss in nine years.
Nevertheless, investors can utilize various ETF strategies to help mitigate interest rate risk. For instance, floating rate note ETFs come with a variable interest rate that adjusts to the prevailing interest rate, which help shield investors against interest rate hikes. [Floating Rate ETFs to Hedge Against Rising Rates]
ETFs in this category include iShares Floating Rate Note Fund (NYSEArca: FLOT), SPDR Barclays Capital Investment Grade Floating Rate (NYSEArca: FLRN) and Market Vectors Investment Grade Floating Rate (NYSEArca: FLTR).
Additionally, short-duration bond ETFs are also popular choices in the fight against rising rates. Some short-duration ETFs include Vanguard Short-Term Bond ETF (NYSEArca: BSV) and iShares Barclays 1-3 Year Credit Bond Fund (NYSEArca: CSJ). [Investors Flock to Low-Duration ETFs for Rising Rate Protection]
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