It has been years since investors have had to deal with rising interest rates, so it is a good idea to consider strategies and ETF investments that can hold up as the Federal Reserve hiked rates.
For instance, fixed-income investors can look to floating-rate notes or debt securities that may more or less negate the negative effects of rising interest rates on the debt securities’ principal.
The notes have a so-called reset period with interest rates tied to a benchmark, such as the Fed funds, LIBOR, prime rate or U.S. Treasury bill rate. Due to their short reset periods, these floating rate funds have relatively low rate risk.
If you want to put your cash to work but are not ready to commit to long-term risks, fixed-income investors may consider a floating rate bond ETF, such as the VanEck Vectors Investment Grade Floating Rate (NYSEArca: FLTR) to act an alternative to traditional cash instruments. FLTR shows a 2.09% 30-day SEC yield and an effective duration of 0.13 years.