{"id":59147,"date":"2023-09-10T06:20:14","date_gmt":"2023-09-10T10:20:14","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/4-income-investments-that-are-better-than-bonds\/"},"modified":"2023-09-10T06:20:17","modified_gmt":"2023-09-10T10:20:17","slug":"4-income-investments-that-are-better-than-bonds","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=59147","title":{"rendered":"4 Income Investments That Are Better Than Bonds"},"content":{"rendered":"
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After a decade of near-zero interest rates, investors no longer need to look far when hunting for yield. And bonds aren\u2019t the only game in town.<\/p>\n

John Rekenthaler, director of research for Morningstar Research Services, points out that investors have piled into intermediate- and long-term bond funds despite their feeble returns.<\/p>\n

\n

\u201cIntermediate-term funds are in the red over the trailing one-, two-, and three-year periods, and are barely positive for the year to date,\u201d he said in a note. \u201cLong funds have fared even worse, being down in 2023 as well.\u201d\u00a0<\/p>\n

That raises the question: What is better than bonds, and where else can investors find robust returns?<\/p>\n

\u201cWe\u2019ve moved from an environment where income and yield was scarce, to now where it\u2019s far more bountiful, and therefore investors don\u2019t have to make a lot of risky choices to capture income,\u201d said Michael Arone, chief investment strategist at
\n State Street
\n Global Advisors.<\/p>\n

High on the shopping list: preferred stocks, which combine elements of stocks and bonds in one investment.<\/p>\n

\u201cPreferreds continue to be an attractive space for investors who are trying to toe the line between bondlike features, which is stable, fixed dividend payments, and equity-like appreciation,\u201d he said. \u201cPreferreds do a good job of balancing those two items.\u201d<\/p>\n

Treasury bills are still paying above 5%, but with a preferred stock, investors get an investment-grade security that yields 6.5%\u2014so solid income\u2014without taking on too much credit risk, said Arone. \u201cTo us, that\u2019s a very attractive proposition in today\u2019s market.\u201d\u00a0<\/p>\n

State Street\u2019s offering is the exchange-traded fund
\n SPDR ICE Preferred Securities ETF
\n (ticker: PSK), which yields 6.56%.\u00a0<\/p>\n

Short-term T-bills are still attractive\u2014the key is to hold the bills to maturity, rather than trying to bet on the direction of rates over the long term. The
\n SPDR Bloomberg 1-3 Month T-Bill ETF
\n (BIL) yields 4.1%.<\/p>\n

ETFs that focus on dividend-paying stocks offer another avenue for income. Here investors can look for ETFs that invest in so-called dividend aristocrats, or companies in the
\n S&P 500
\n index that have a history of increasing dividends for 25 consecutive years or more.<\/p>\n

Among the ETFs that invest in such stocks is
\n ProShares S&P 500 Dividend Aristocrats ETF
\n (NOBL), an $11.65 billion fund that tracks the S&P 500 Dividend Aristocrat Index. The yield is 1.95% and year to date total return is 4.43%.<\/p>\n

The yield on dividend stocks may not appear compelling at first blush, but there\u2019s a long-term reason to consider adding them to your portfolio. \u201cThis is stock investing, not bonds, and therefore you get the opportunity for price appreciation,\u201d Arone said. \u201cAnd companies that exhibit these characteristics reward investors over the long term with outsize returns or better returns than bonds.\u201d<\/p>\n

Investors who are expecting a slowdown in the economy and a possible recession should have high-quality companies in their stock portfolio and dividend growers tend to be those high-quality companies, he added.\u00a0\u00a0<\/p>\n

This year investors have flocked to money-market funds\u2014mutual funds that invest in cash and low-risk securities. One advantage of these cash-like instruments is that it is easy to move money into them from mainstream brokerage accounts. <\/p>\n

Keep an eye on fees when shopping around. The popular Fidelity Money Market Fund (SPRXX), with a yield of 5.04%, has an expense ratio of 0.42%, while the Vanguard Federal Money Market Fund (VMFXX), yielding 5.27%, only charges 0.11%.<\/p>\n

One caveat: Arone said investors should understand the liquidity, interest-rate risk, credit risk, and potential volatility associated with money-market funds. \u201cHistorically when investors have gotten themselves in trouble is when the yields are really juicy and attractive.,\u201d he cautioned.\u00a0<\/p>\n

Write to Lauren Foster at lauren.foster@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

After a decade of near-zero interest rates, investors no longer need to look far when hunting for yield. And bonds aren\u2019t the only game in town. John Rekenthaler, director of research for Morningstar Research Services, points out that investors have piled into intermediate- and long-term bond funds despite their feeble returns. \u201cIntermediate-term funds are in […]<\/p>\n","protected":false},"author":1,"featured_media":59148,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-59147","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"\n4 Income Investments That Are Better Than Bonds | iFintechWorld<\/title>\n<meta name=\"description\" content=\"After a decade of near-zero interest rates, investors no longer need to look far when hunting for yield. 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