Fixed income investors are well aware of the challenges associated with getting yield in the current market environment. Lost amid the presidential election hype is the Federal Reserve keeping rates steady, which should make finding yields more challenging moving forward: a case for using the Xtrackers Low Beta High Yield Bond ETF (HYDW).

HYDW seeks investment results that correspond generally to the performance, before fees and expenses, of the Solactive USD High Yield Corporates Total Market Low Beta Index (the “underlying index”). The fund will invest at least 80% of its total assets, (but typically far more) in component securities of the underlying index.

The aforementioned underlying index is designed to track the performance of the segment of the U.S. dollar denominated high yield corporate bond market that exhibits lower overall beta to the broader high yield corporate fixed income market.

To summarize the benefits of HYDW, investors get:

  • Potential income opportunity with higher-yielding bonds: With interest rates near all-time lows, high-yield bonds can help fixed-income investors on the hunt for additional yield.
  • Dynamic toolbox to access high-yield bond market exposure: ETFs can give investors more diversified exposure to the broader high-yield bond market. The suite of high-yield ETFs allows investors to manage credit, duration and ESG exposure for a more customized solution.
  • Cost effective solutions with Xtrackers: The Xtrackers lineup offers one the industry’s most cost-effective high yield credit solution suites.

Why go with high yield in a market environment that’s fraught with uncertainty? Well, to use the old adage “no risk, no reward,” in order to get more yield, investors will have to take on more risk.

HYDW Chart

If you don’t have the cast iron stomach for risk, don’t fret because HYDW offers high yield exposure, but to high quality debt. It uses the higher-credit quality and lowest-yielding half of the more broad-based Xtrackers USD High Yield Corporate Bond ETF (HYLB).

HYLB seeks investment results that correspond generally to the performance of the Solactive USD High Yield Corporates Total Market Index. The index comprised of U.S. dollar-denominated high yield corporate bonds and concentrates in a particular industry or group of industries to the extent that its underlying index is concentrated.

Back to HYDW, healthcare has been a strong outperformer amid the COVID-19 pandemic. This is pertinent to HYDW since the fund, as of November 4, has holdings in healthcare companies like Tenet Healthcare Corp and HCA Inc.

Additionally, with a net expense ratio of just 0.20%, HYDW gives investors high yield exposure at a low cost. Cost, in today’s competitive ETF market, is becoming an even greater factor than it has ever been before.

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