Skip to main content

The following are new investments that those saving for or living in retirement might consider for their portfolios. This week: A short-duration income ETF and two ETFs that would focus on U.S. stocks and would not charge a management fee for at least one year.

Legg Mason and Western Asset Management has launched Western Asset Short Duration Income (WINC) ETF. The fund, which seeks current income, invests at least 80% of its net assets, plus borrowings, in investment-grade fixed-income securities, corporate debt securities, namely notes, bonds, debentures and commercial paper. The fund may also invest in short-duration fixed-income securities with a duration of three years or less.

According to Roger Nusbaum, an investment adviser with Your Source Financial, WINC is short-term bond proxy that is actively managed. "There is nothing unique about the exposure offered but obviously the manager will tell you that what they do is different because," he says. "That is not a knock on the fund, just the reality of a busy market even if not a saturated market."

In considering a fund such as WINC, Nusbaum says investors would likely need to compare and contrast it against some sort of indexed exposure. "Can WINC, or some other alternative to an index fund, truly add value?," he asks. "There is no way to know with a certainty but over some long period of time it would make sense to expect that an active strategy will at times outperform its index benchmark while at other times it will lag."

According to Nusbaum, the reasons to consider an actively managed fund over an indexed vehicle include the fact that index funds tend to be debt weighted which means the most indebted companies are the most prominently featured; the more debt a company issued the larger its weighting in the index. "This would seem to be sub-optimal," he says. "An active strategy has the opportunity to avoid the most indebted companies and avoid ground zero for some future event that might roil markets."

Of note, WINC has a 0.29% expense ratio compared to 0.07% for Vanguard Short Term Corporate Bond ETF (VCSH). "Is 22 basis points too big of a bogey to overcome or is that extra 22 basis points worth the potential advantage offered by an active strategy, with the emphasis on potential?" Nusbaum asks. "That is for the investor to decide but that is what it boils down to."

Social Finance (SoFi) has filed for approval of two ETFs that would focus on U.S. stocks and would not charge a management fee for at least one year. The SoFi 500 ETF and the SoFi Next 500 ETF would be weighted based on fundamental factors and market cap.

According to Nusbaum, SoFi created a lot of buzz with news that it intends to launch two ETFs that will not charge a management fee. it would be waived for one year and it is possible the fee waiver could be extended which is a common practice in the ETF industry, he says.

"Where the funds have not been launched there are still plenty of details to emerge about the SoFi 500 ETF and the SoFi Next 500 ETF but they appear to be a way to draw investors to SoFi's new brokerage firm," says Nusbaum. "To the extent the SoFi brokerage can attract assets then it is likely that SoFi 500 ETF and the SoFi Next 500 ETF will also attract assets. It probably does not make sense to switch out of an existing broad-based equity index ETF to buy one of these as the prevailing fee for this space ranges from $3-$5 per $10,000 invested. Free is nice but $3 is already pretty close to free."

One final point is that you may see commentary dismissing these funds as gimmicks but, Nusbaum says, SoFi is teaming up with Exponential ETFs and Toroso Asset Management to bring these to market. "Both firms are very shrewd and if they are on board then there is a good chance that the strategy has merit," he says.

A Special Invitation: Do you want to learn more about planning for and living retirement from the nation's top experts, including Ed Slott and Robert Powell, the editor of TheStreet's Retirement Daily? Want to learn how to create tax-efficient income in retirement and how to manage and mitigate all the risks you'll face in retirement? Then sign up to attend TheStreet's Retirement Strategies Symposium on April 6 in New York City. For a limited time, you can attend this extraordinary symposium for $149 - a cost savings of $50 off the general admission price of $199. You can see the full day's agenda, learn about the guest speakers and sign up here for this special event.

Got questions about the new tax law, Social Security, retirement, investments, or money in general? Want to be considered for a Money Makeover? Email