For many experienced fixed income investors, the barbell strategy is often used to set one’s portfolio up for balanced success.
The barbell strategy itself is fairly straightforward. It essentially involves balancing a high-risk investment with a low-risk counterpart. Traditionally, this means avoiding investments that offer a middle ground in terms of risk.
For fixed income, one classic combination is to barbell short-term bonds with long-term counterparts. In theory, this strategy offers good yield while blunting some of the downside risk.
That being said, there’s plenty of other ways to use a barbell strategy in fixed income. Given the flexibility of the ETF structure, many fixed income funds can be positioned as barbell investments.
Blending Yield and Risk Mitigation
Here’s an example: Take a closer look at the Eaton Vance Floating-Rate ETF (EVLN ). EVLN provides broad investment access to a variety of securities within the floating-rate loan market.
Floating-rate loan strategies like EVLN can offer highly compelling yield. As of January 17, 2025, EVLN has a 30-day SEC yield of 7.43%.
Inversely, floating-rate loans traditionally can present more risk than other fixed income securities. Accordingly, a floating-rate loan ETF makes a great candidate to barbell with a lower-risk alternative.
One fund in particular that could do the trick is the Eaton Vance Total Return Bond ETF (EVTR ). EVTR offers a core-plus bond strategy, mixing investment-grade securities with a smaller selection of high yield bonds.
As a core-plus bond fund, EVTR traditionally carries a lower risk profile than a floating-rate loan strategy would. That being said, the fund still offers good yield, with a 30-day SEC yield of 4.91% as of January 17, 2025.
Putting these two ETFs together can create an interesting combination. EVLN can offer highly compelling income that can compete with high yield bonds. Meanwhile, EVTR can serve as a more stable ballast to balance out the risk profile.
At times, it can be difficult to truly attain the “best of both worlds” within any investment strategy. However, applying fixed income ETFs with effective track records into a barbell strategy may be able to do just that.
For more news, information, and analysis, visit The ETF Yield Channel.
