This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

ETFs for a Rising Rate Environment

NEW YORK (FMD Capital Management) -- One of the biggest conundrums income investors face heading into 2014 is how to anticipate a move in interest rates. Nearly every week we get more economic data that seems to support the dreaded "taper" scenario of the Fed easing off the bond buying gas pedal. In addition, we are swiftly approaching a new era of Federal Reserve leadership under Janet Yellen, who will be tasked with reading the tea leaves with respect to timing the Fed's exit strategy.

With so many factors in play, it's time to consider whether we will see a break higher or lower in rates next year and how that will impact both bonds and stocks. I want to focus on how to position your portfolio to insulate yourself from these risks while still taking advantage of income opportunities.

A quick look at the 10-Year Treasury Note Yield shows that it is drifting back towards the top end of its range since hitting a high in September. This has put pressure on assets with the highest sensitivity to interest rates such as treasury bonds, REITs, and high-grade corporate bonds.

Noted fixed-income managers Bill Gross and Jeff Gundlach have taken an agnostic view about where interest rates are headed, and I tend to agree with that belief in the short-term. As a trend follower, I have been advocating selling long-duration securities in favor of shorter-duration holdings with a risk management mindset. I am focusing my fixed-income exposure in ETFs and mutual funds that have an overweight allocation to high yield, bank loans and other performing sectors.

I think it makes sense to diversify your exposure to areas of the market that offer alternative dividend streams or enhanced value propositions. One of my favorite equity income ETFs that does this is the First Trust NASDAQ Technology Dividend Index (TDIV). I like this fund because it gives you exposure to a subset of technology stocks that are focused on returning value to shareholders through cash dividends. The current 30-day SEC yield is 2.51% and distributions are paid on a quarterly basis.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,943.81 +28.74 0.17%
S&P 500 1,967.57 +2.89 0.15%
NASDAQ 4,415.49 +19.2860 0.44%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs