The “will they, won’t they” between the Trump administration and the Iranian government has gone on for weeks, and while headlines avoid it, the energy disruption remains a huge story. Not only has infrastructure been devastated in key energy production zones, but other critical commodities like fertilizer have become much more expensive as well. It’s important for investors to respond, especially those at or near retirement. The right type of income ETFs can be that response.
Key Takeaways:
- Income ETFs have exploded in popularity since the arrival of the so-called ETF rule in 2019.
- Active management can help bring income strategies to life, and are especially useful for volatile periods.
- Geopolitics will potentially impact markets for the rest of the year, making portfolio durability a critical priority.
With equities so tumultuous, refreshing bond allocations may prove to be the savvier move. Especially with an active ETF approach, income ETFs can navigate issuers and find those offering a combination of income and durability. While passive bond funds may struggle to maintain target weightings when bonds are called early, active funds can pivot quickly to stay on strategy.
American Century Investments offers some intriguing income ETFs that may fit the bill. Specifically — SDSI and MUSI — two funds that make income a priority. SDSI, the American Century Short Duration Strategic Income ETF, charges a 32 basis point fee, while MUSI, the American Century Multisector Income ETF, charges a 38 basis point fee.
SDSI actively invests in short duration fixed income securities. The income ETF actively invests in securities issued or guaranteed by the U.S. Treasury or certain government agencies as well as bank loans, asset-backed securities, and other debt offerings. What’s more, SDSI can also use derivatives, swaps, currency forwards, and various other investment tools to achieve its income goals.
