Often the word patience is ascribed to the task of investing and that is relevant here. To chase yield is to be impatient. Markets have seen this behavior before and it ends badly.
The task evolves into finding yield while still maintaining something close to fixed income beta. Getting yield from the equity portion of the portfolio is a valid, proven and necessary approach but fixed income is fixed income not equity and there are market segments that provide some yield, not 5% from two year treasuries like in the summer 2006 but better than a handful of basis points.
Advisors need to do the leg work to help their clients and individuals need to do the leg work to help themselves. This includes a lot of reading and a lot of studying of new products which sounds like a lot except that just about every fund company has resources (both products and educational material) available to help. This obviously serves the fund companies’ interests but there is also a legitimate need here as well. Segment we are talking about include floating rate, bank loan, high yield, active management, semi-active management and on and on.
Not easy but not impossible either.
This article was written by AdvisorShares ETF Strategist Roger Nusbaum.