Picking the right fixed-income ETF or mutual fund that suits your needs is all about evaluating your risk tolerance and investment objectives. You should do some analysis of top performing funds from previous years and ask yourself how they will perform under certain scenarios. If the Fed decides to speed up or slow down it’s taper agenda, you may have to shift your portfolio to cope with changing dynamics. In addition, it’s important to keep an eye on the health of equity and credit sensitive markets as these will impact the bond market in the coming year ahead.
One actively managed mutual fund that is one of my favorite core holdings is the PIMCO Income Fund (PONDX) which takes a multi-sector approach to specific areas of the bond market that the manager feels will outperform. They have done a fantastic job of managing interest rate risk in 2013 and taking advantage of opportunities (both inside and outside the U.S.) when they are available. This has led to year-to-date returns approaching 4.5%, an effective duration of less than 5 years, and a current 30-day SEC yield of nearly 4%.
In a following series of articles, I will detail my thoughts on equities and alternative investments for income investors in 2014. As you are evaluating your portfolio heading into the new year, make sure that you stay balanced and agile with respect to opportunities and risks that may present themselves. That way you are prepared with a game plan to shift your asset allocation when needed and overcome any obstacles that you may encounter.
This article is brought to you courtesy of David Fabian from FMD Capital Management.