Welcome to this week’s ETF Insider. With the Federal Reserve again jacking up interest in effort to tackle inflation, it’s a perfect time to dig into fixed-income ETFs. We’ll look at how to put the bond market pounding in perspective for clients.
First, we’ll parse a Vanguard piece that describes how rising interest rates have hit the returns of one of its bond index ETFs, but driven yields on the product higher. It’s a good time to remind clients that, over the long run, higher interest rates translate into more income for bond-fund shareholders – even if it means some pain in the short-term, Vanguard says. Other managers seem to agree with the principle.
Active managers aim to take advantage of some of the turmoil and beat the battered benchmarks. Investors can now access bond-picking strategies in nearly every major segment of the fixed-income market via the ETF wrapper, a new white paper indicates. Portfolio mangers seem more comfortable with the transparency elements of active bond ETFs. Perhaps more importantly, they seem to be able to beat their passive fund rivals even after fees, the report notes.
Thanks, as always, for reading this newsletter. Reach out at firstname.lastname@example.org
Jackie Noblett, producer of ETF Insider at Financial Advisor IQ