Looking for an intriguing combination of fixed income ETFs to freshen up your fixed income allocation? Not only are not all fixed income strategies created equal; not all fixed income approaches offer the same benefits. Many investors combine varying types of fixed income assets to craft their preferred, overall allocation. The ETF vehicle’s flexibility and tax advantages can provide a potent route into those strategies.
See more: Revisiting Fixed Income? This Active Corporate Bond ETF Is Beating Its Benchmark
With rates likely to continue to shift following this Fall’s rate cuts, it could be time to revisit bonds. At the same time, for those investors in mutual funds, ETFs offer some appealing tax advantages. That could make fixed income ETFs an appealing landing point for reinvesting tax-loss harvested assets – as long as it meets the “Wash Sale” rule.
The American Century Diversified Corporate Bond ETF (KORP ) provides one option to consider. KORP actively invests in U.S. corporate debt. The strategy focuses on five to seven years duration, generating income from BBB-rated debt. Its active approach helps it craft a specific, but diversified allocation. Charging 29 basis points (bps), relatively low for the category, it has returned 11.9% over one year per American Century Investments data. It has yielded 5% per its 30-day SEC Unsubsidized Yield.
Income can offer some particular advantages, especially for those at or near retirement. With costs still high, a fixed income allocation with income can offer a meaningful boost. The American Century Multisector Income ETF (MUSI ), charging just 36 bps, hit its three-year ETF milestone in June. MUSI looks to provide a high level of income with a broad, global bond portfolio without a particular target duration. MUSI offered a weighted average coupon of 5.77% as of September 30th per American Century Investments data.
Finally, for those expecting slower rate cuts, a more short duration approach could appeal. The American Century Short Duration Strategic Income ETF (SDSI ), which charges 33 bps, offers a different approach than MUSI does. SDSI focuses on U.S. short duration offerings like bank loans, agency debt, and mortgage or asset-backed securities. That stands in contrast to MUSI’s broader, global bond focus. SDSI actively invests to do so.
Together, the trio provide some intriguing options in the ETF space. For those looking for a refresh, KORP, MUSI, and SDSI might appeal.
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