Sticking with tried-and-true safe haven bonds won’t generate the type of yield investors are seeking these days, which warrants the use of an active management style and diversification.
Thankfully, investors can derive both of those benefits in one ETF. The T. Rowe Price Total Return ETF (TOTR) seeks to offer maximum returns for investors primarily through income, as well as capital appreciation by investing in a diverse set of bonds and debt instruments.
TOTR is constructed to be flexible in changing market conditions while still seeking strong returns. The fund primarily invests in U.S. intermediate-term bonds but has the freedom to purchase bonds from across the global opportunity set and maturity spectrum.
Examples might include debt securities issued by the U.S. government and its agencies, corporate bonds, bank loans, and various types of mortgage-backed and asset-backed securities. TOTR is ideal for the investor looking for total returns via price appreciation as well as income.
As of January 31, the fund has 407 debt holdings with an average maturity date of nine years with an average duration of six years. Government securities comprise the majority of the fund at close to 30% of the fund, and the second-largest holdings are Treasury notes at about 23%.
While the fund description mentions an emphasis on intermediate bonds, the fund is currently skewed more towards the short term, which is an ideal move given the prospect of rising rates. Close to 50% of the fund contains holdings that don’t exceed a duration of five years.
401(k) Trading Favored Fixed Income
401(k) account holders were busy with their own active management when it came to their retirement portfolios. January saw the most trading activity, according to the Alight Solutions 401(k) index.
“The index shows an average of 0.017% of all account balances were traded daily last month, which was the highest level since January 2021,” an Investment News article says. “Last month saw five trading days with above-normal activity, which compares with just three such above-normal trading days in all of 2021.”
“Alight said that in 13 of the 20 trading days last month, investors favored fixed income over stocks,” the article adds further. “Inflows during the month headed mainly to stable value funds, bond funds and money market funds, while outflows came from target-date funds, large-cap U.S. equity funds and midcap U.S. equity funds.”
For more news, information, and strategy, visit the Active ETF Channel.