Alternatively, investors can hedge against rate risk by shifting down durations. A bond fund’s duration is a measure of sensitivity to changes in interest rates, so a bond ETF with a low duration will be less sensitive to rising rates.
For example, the iShares Barclays TIPS Fund (NYSEArca: TIP), which has a 7.42 real yield duration, fell 7.5% over the past year, whereas the FlexShares iBoxx 3-Year Target Duration TIPS (NYSEArca: TDTT), which has a 3.12 duration, dipped 1.6%.
Moreover, investors can consider alternative income strategies, such as a covered call ETF, including the Horizons S&P 500 Covered Call ETF (NYSEArca: HSPX), Horizons Financial Select Sector Covered Call ETF (NYSEArca: HFIN) and Recon Capital NASDAQ 100 Covered Call ETF (NasdaqGS: QYLD). By utilizing a covered call strategy, an investor who owns a stock sells call options, and collects the income from the premiums paid by the buyer of the option. [Covered Call ETFs Mute Volatility, Generate Income]
Financial advisors interested in attending the annual virtual summit on January 15 can register at ETF Virtual Summit registration.