It is difficult to pinpoint why SPFF has held up better. It does have the higher yield and has slightly less exposure to the financial sector at 78%, but a three-month window is too short of a time frame to draw a definitive conclusion about whether the fund will hold up better if rates rise meaningfully.
That is the heart of the dilemma for income investors. If they own nothing but short-dated bonds or bond funds, then their yield will be close to zero. If they put too much in higher yielding longer-dated issues, then they will be hit very hard when rates do go up.
There can be no single answer for everyone. Investors relying on their portfolio for income need at least some yield. One solution for now can be a blend of funds; some like the preferred stock ETFs and other funds that may have very low yields but that won't drop meaningfully if rates go up.
ETF provider Guggenheim offers a line of bond funds called BulletShares where the entire portfolio all matures in the same year so the BulletShares 2015 Corporate Bond ETF (BSCF) will offer protection against rising rates because its holdings all mature in 2015. The iShares 2016 Corporate Term ETF (IBDA) has a similar structure to BSCF and should offer similar protection.At the time of publication the author held no positions in any of the stocks mentioned. Follow@randomroger This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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