In today’s low-yield climate, advisors and investors must go beyond low-yield dividend stocks and Treasuries. That can mean embracing multi-asset funds to boost income.
However, that can be a cookie cutter strategy. The WisdomTree series of Global Multi-Asset Income Model Portfolios is a customized approach to multi-asset income.
These model portfolios are “designed to help maximize income, offer capital appreciation potential and reduce volatility, this strategy typically provides exposure to a diversified allocation of dividend-focused stocks and yield-focused bonds using ETFs with global exposure. The strategy may include both WisdomTree and non-WisdomTree ETFs. These model portfolios were previously known as Income Model Portfolios,” according to the issuer.
Exchange traded funds in the model portfolio are allocated across various income-producing asset classes to optimize portfolio stability, efficient growth, and income, all with a defensive quality bias.
Model Portfolios: A Better Idea for Diversified Income
“Given the scarcity of income from high-quality bonds, investors may understandably cast a wandering eye toward the seeming oasis offered by multi-asset income funds,” according to Morningstar. “These allocation funds combine multiple income-producing asset classes, like dividend-paying stocks, REITs, high-yield bonds, and emerging-markets debt, to generate above-average income.”
Within the Global Multi-Asset series, there seven portfolios for advisors to consider, ranging in risk tolerance from very conservative to very aggressive, ensuring there’s something for a variety of client risk profiles.
The moderate multi-asset model portfolios offered by WisdomTree have a 60% weight to equities, which are comprised of 10 ETFs, many of which are dedicated dividend or income strategies. The remaining 40% is allocated to seven fixed income ETFs addressing various bond asset classes of varying credit qualities and maturities.
“The average multi-asset income fund in the category has yields just over 4%, almost 2 full percentage points more than a straightforward 40/60 portfolio of U.S. stocks and bonds and almost 1.5 percentage point more than the average core and core-plus bond fund,” notes Morningstar. “Multisector bond funds, which have similar allocations as multi-asset income funds with the exception of stocks, comes the closest with an average 12-month yield of 3.75%. The additional income from these multi-asset income funds doesn’t come without additional risk, though.”
By diversifying across assets and credit qualities, WisdomTree’s model portfolios reduces some of the risks associated with single multi-asset funds while still delivering above-average levels of income.
For more on how to implement model portfolios, visit our Model Portfolio Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.