One of the enduring pieces of financial advice when it comes to income sources is to treat them like a busy intersection — have multiple avenues at once. One way to follow this advice is to diversify fixed income sources via exchange traded funds (ETFs) like the American Century Multisector Income ETF (MUSI).
MUSI comes with a 30-day SEC yield of 4.62% as of May 31. While the fund invests in investment-grade corporate debt, MUSI will step out deeper into riskier credit in order to extract more yield.
In terms of duration, the fund focuses on more short-term to intermediate-term debt. The weighted average life to maturity, once again as of May 31, is about 6.5 years.
Per the overall fund’s description, MUSI (via active management) seeks to deliver high levels of current income and attractive risk-adjusted returns over a full market cycle. Features of MUSI per its product website:
- Invests in a diverse portfolio consisting of investment-grade corporate, high yield (up to 65%), securitized, and emerging markets debt securities.
- Sector allocation decisions managed tactically, driven by global macroeconomic outlook and assessment of relative valuation among sectors.
- Sector specialist teams select individual bonds based on their own fundamental, bottom-up analysis.
Flexibility and Risk Management
As the fund description notes, MUSI is actively managed, allowing ETF investors the option to get exposure to more flexibility and risk management strategies. With the assistance of a professional team of portfolio managers, MUSI gives investors dynamic exposure to the fixed income market with respect to its selection of holdings.
With the ability to get in and out of positions when the market environment deems necessary, the fund has more flexibility in a current market environment where rate hikes are prevalent. Additionally, this gives the fund additional risk management by allowing the fund’s managers to pivot and adjust the portfolio’s holdings whenever necessary.
“Active fund managers have more flexibility,” Investopedia explained. “There is more freedom in the selection process than in an index fund, which must match as closely as possible the selection and weighting of the investments in the index.”
“Active fund managers can manage risks more nimbly,” Investopedia also noted.
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