“We believe it has the potential to provide significantly lower levels of interest rate and credit risk versus a corporate bond fund,” Martin said. DIVA is an “effective alternative to buying high-yield fixed income funds to potentially increase overall portfolio yield and reducing correlation. [DIVA] allows the potential for higher yields of dividend stocks while protecting against the characteristic volatility of equity markets.”
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Due to its customized 100/50 long/short equity strategy, the overall risk is approximately half of the S&P High Yield Dividend Aristocrats Index, providing investors a risk profile closer to an investment-grade corporate bond index.
Furthermore, investors who are wary of further market drawdowns may look to a hedged equity strategy, such as the QuantShares U.S. Market Neutral Anti-Beta Fund (NYSEArca: BTAL).
“Our research has shown that allocating a strategic position to BTAL is the best way to insulate your portfolio from unexpected market events,” Martin said.
BTAL provides investors with the means to capitalize on the spread return between low- and high-beta stocks within the S&P Dow Jones U.S. Index. When the market sells of and volatility rises, high-beta stocks tend to sell off more than low-beta stocks. On the other hand, during market recoveries, volatility diminishes and high-beta names outperform low-beta stocks.
Financial advisors who are interested in learning more about alternative income strategies can watch the webcast here on demand.