It’s an ongoing struggle for investors who want yield, but don’t want to take on a high degree of risk. Fortunately, Vanguard has a pair of fixed income ETFs that can help.
When it comes to a high-yield fund, the benefit is that when rates rise, the yield already has a head start. When bond prices dip, the yield is high enough to recoup the loss.
“That’s definitely an attractive feature in a higher-rate environment,” said certified financial planner Howard Pressman, partner at Egan, Berger & Weiner in Vienna, Virginia.
Another option is to focus on dividends to help eliminate credit risk. One ETF to consider is the Vanguard High Dividend Yield Index Fund ETF Shares (VYM).
The fund employs an indexing investment approach designed to track the performance of the FTSE High Dividend Yield Index, which consists of common stocks of companies that pay dividends that generally are higher than average. The advisor attempts to replicate the target index by investing all, or substantially all, of their assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.
In summary, VYM:
- Seeks to track the performance of the FTSE® High Dividend Yield Index, which measures the investment return of common stocks of companies characterized by high dividend yields.
- Provides a convenient way to track the performance of stocks that are expected to have above-average dividend yields.
- Follows a passively managed, full-replication approach.
For International Exposure
For investors looking to get international exposure, there’s the Vanguard International High Dividend Yield ETF (VYMI). Other parts of the globe can offer higher dividend yields if investors are willing to accept more risk.
VYMI offers an all-in-one option, allowing investors to navigate the international debt markets without needing to pore over copious amounts of financial data to find the best opportunities. Furthermore, international investing has its own set of nuances, and VYMI can assist with taking out that guesswork.
- Seeks to track the performance of the FTSE All-World ex US High Dividend Yield Index.
- Provides a convenient way to get exposure to international stocks that are expected to have above-average dividend yields.
- Employs a passively managed sampling strategy.
- Has strong performance with a year-to-date gain of 4% and a yield of also 4%
For more news, information, and strategy, visit the Fixed Income Channel.