“The return of volatility to the U.S. stock market in October serves as a timely reminder that bull markets don’t last forever,” wrote Lisa Springer, contributing writer for Kiplinger. “Every investor must rebalance occasionally to shield portfolios from downside risk. But rather than just shifting your allocations in U.S. stocks and bonds, investors may want to go outside the box … and into some high-yield alternative strategies.
As such, here are three high-yielding fixed-income ETFs to consider given today’s volatile landscape.
1. SPDR Blmbg BarclaysST HY Bd ETF (NYSEArca: SJNK)
SJNK seeks to provide investment results that correspond generally to the price and yield performance of the Bloomberg Barclays US High Yield 350mn Cash Pay 0-5 Yr 2% Capped Index. SJNK invests its total assets in the securities comprising the index, which is designed to measure the performance of short-term publicly issued U.S. dollar-denominated high yield corporate bonds. The short-term maturities will help hedge some credit risk due to the lesser exposure, but holdings are still less than investment-grade. SJNK has returned 3.75% year-to-date, 4.09% the past year and 6.63% the last three years.
2. iShares 0-5 Year High Yield Corp Bd ETF (NYSEArca: SHYG)
SHYG seeks to track the investment results of the Markit iBoxx® USD Liquid High Yield 0-5 Index, which is primarily composed of U.S. dollar-denominated, high yield corporate bonds with remaining maturities of less than five years. Like SJNK, debt maturities are shorter, thereby helping to hedge some credit risk, but issues are still less than investment-grade. Nonetheless, SHYG has managed to return 0.16% year-to-date.
3. iShares iBoxx $ High Yield Corp Bd ETF (NYSEArca: HYG)
HYG tracks the investment results of the Markit iBoxx® USD Liquid High Yield Index, which is comprised of high yield U.S. corporate bonds that have less than investment-grade quality. Investors who have been able to forego the credit risk have seen total returns of 6.74% the last three years, 2.46% the past year and 2.50% year-to-date based on Yahoo! Finance performance figures.
For more trends in fixed income, visit the Fixed Income Channel.