Retirees who are managing their portfolios should not chase after returns. Instead, most exchange traded fund investors saving for retirement should include strategic allocations and find opportunities in alternative income investments.

For instance, Michael Fabian, a managing partner at FMD Capital management, suggests taking a look at preferred stocks and REITs, two themes that have emerged in their Strategic Income Portfolio.

Specifically, the iShares U.S. Preferred Stock ETF (NYSEArca: PFF) provides investors with exposure to preferred stocks, which provide a specified dividend paid before common stock holders and take precedence over common stocks in case the company goes under. PFF shows a 5.66% 12-month yield.

“Alongside the view that the equity markets will avoid a major calamity in 2013, we find that many individual issue preferred stocks have worked off their excess premiums to par value, and are now resting at relatively attractive valuations when compared with earnings multiples of high dividend stocks,” Fabian said.

More over, PFF has a lower beta to the S&P 500 Index and offers a higher dividend yield than the average stock on the index.

Rampant speculation regarding rising interest rates pressured sensitive assets like preferred stocks. [Preferred ETFs Need Some Fed Help]

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