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Safe Funds That Yield a Bit More Than Money Markets

Investors who seek a steadier parking place than the PIMCO ETF could consider Guggenheim Enhanced Short Duration Bond ETF (GSY), which yields 0.47% and has a duration of 0.33. Over the past 52 weeks, the share price fluctuated from a low of $49.54 to high of $50.18.

Actively managed, the Guggenheim ETF can hold securities that are rated below-investment grade. The fund currently has 5% of assets in Guggenheim BulletShares 2015 High Yield Corporate Bond (BSJF), an ETF that yields 5.2% and has credit quality that is below-investment grade.

"By investing in the high-yield ETF, we can pick up extra yield in an efficient way," says William Belden, Guggenheim's head of product development.

For a high-quality choice, consider RidgeWorth U.S. Government Securities Ultra-Short Bond (SIGVX), a mutual fund that yields 0.85% and has a duration of 0.81 years. The fund focuses on government mortgage securities. Those yield a bit more than Treasuries.

About 40% of assets are in adjustable-rate mortgages. If interest rates rise, the yields on the securities would also climb, protecting shareholders against losses. During the turmoil of 2008, the average ultrashort fund lost money, but RidgeWorth sailed through the crisis and returned 3.5% for the year.

During the past five years, the fund returned 2.7% annually.

"We did not lose money during the financial crisis because we are very conservative about the credit risk we take," says portfolio manager Chad Stephens.

Charles Schwab recently filed to offer an actively managed short-duration ETF, and more companies are likely to follow. With money-market yields stuck at puny levels, investors will continue seeking safe alternatives.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.
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