The SPDR income allocation fund, which yields 4.0%, invests in a broad collection of ETFs. The portfolio recently had 18% of assets in SPDR Barclays Long Term Corporate Bond ( LWC), 6% in SPDR S&P Emerging Markets Dividend ( EDIV), and 3% in SPDR Barclays High Yield Bond ( JNK). The portfolio managers use quantitative models and their own judgment to set allocations. Fearing that government bonds are overpriced, the managers have been emphasizing corporate issues. The managers have also been tilting away from bonds and toward stocks. The portfolio currently has 44% of assets in equity funds, up from the neutral weighting of 35%. During the past year, the fund returned 13.4%, compared to 30.5% for the S&P 500 and 0.8% for the Barclays U.S. Aggregate.

To limit the impact of rising interest rates, the SPDR fund has been emphasizing bonds with lower credit qualities. Those can be relatively resilient during periods when Treasuries fall. If rates continue climbing, the portfolio managers can add bonds with shorter maturities. Short-term bonds tend to suffer limited losses during periods of climbing rates.

The iShares income ETF, which yields 5.1%, tracks the Morningstar Multi-Asset Income Index. The benchmark holds about 60% of assets in fixed income, 20% in equity, and 20% in alternative income sources, such as REITs and preferred shares. The portfolio invests in a collection of iShares ETFs. Recently the fund had 6% of assets in iShares High Dividend Equity ( HDV), 15% in iShares Barclays 20+ Year Treasury Bond ( TLT), and 5% in iShares S&P U.S. Preferred Stock Index ( PFF). The allocations are adjusted by a Morningstar model that aims to maximize yields and returns while controlling risk. During the past year, the ETF returned 8.4%.

At the time of publication the author had no position in any of the stocks mentioned.

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.

If you liked this article you might like

Guggenheim Multi-Asset Income ETF Experiences Big Outflow

Forget Target-Date ETFs -- Consider These Multi-Asset ETFs Instead

ETF Income Investing for 2014, Part 3: Alternative Strategies

This ETF Hogs Yield

This ETF Hogs Yield