ETFs For Income Investors To Consider In 2014

On the fixed-income side of the ledger, I would not be surprised to see a comeback in emerging market debt in 2014.  One of my favorite ETFs to play this space is the actively managed WisdomTree Emerging Market Corporate Bond Fund (NASDAQ:EMCB).  Currently EMCB has a 30-day SEC yield of 5.04% and an effective duration of 5.5 years.

One of the more attractive observations going for emerging market debt is the large divergence in performance when compared to high yield corporate bonds of a similar credit quality.  Consider that the iShares High Yield Corporate Bond ETF (NYSEARCA:HYG) is trading near all-time highs and has a comparable yield to ECMB.  However, emerging market corporate bonds are still more than 5% off their high water mark.  I expect that this divergence will eventually correct and we could see money flow into emerging markets as fixed-income investors find more value overseas.

The Bottom Line

The next several months are going to be interesting to watch for income investors as both stocks and bonds digest real or imagined policy shifts from the Federal Reserve.  This could lead to additional volatility throughout the global economy as we start the new year.  One thing is for certain, I expect 2014 to bring with it a whole new array of opportunities and risks for vigilant income investors.  The key to success will be actively shifting your portfolio to sectors that with a high degree of risk-to-reward potential.

This article is brought to you courtesy of David Fabian from FMD Capital Management.

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