Displaying items by tag: income

As interest rate hikes pause, short-term bond funds remain a compelling option for investors seeking steady income with limited rate sensitivity. These funds, which invest in government and corporate debt maturing within five years, can provide attractive yields while minimizing the downside of rate volatility. 

Ideal for short-term goals, they offer better returns than savings accounts without the higher risk of longer-duration bonds or equities. Top picks in this category include SPDR Portfolio Short-Term Corporate Bond ETF (SPSB), iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB), Schwab 1-5 Year Corporate Bond ETF (SCHJ), Vanguard Short-Term Bond ETF (BSV), and Fidelity Short-Term Bond Fund (FSHBX)—all offering yields north of 4%, with low expenses. 

While short-term bonds aren’t risk-free, they’re a smart choice for investors looking to park cash with a time horizon of three to five years.

Finsum:  As always, cost matters—opt for funds with lower fees to maximize net returns.

In a market rattled by volatility in both stocks and bonds, dividend ETFs are drawing attention as a middle ground between growth and income strategies. While passive giants like Vanguard’s VIG and Schwab’s SCHD dominate with low fees and broad exposure, a growing number of active ETFs—like T. Rowe Price’s TDVG—are betting they can outperform by handpicking high-quality dividend payers. 

TDVG blends income with potential capital appreciation and holds familiar names like Apple and Microsoft, offering tech exposure without overconcentration. Active managers argue their flexibility allows them to adapt to changing market conditions in ways passive index funds cannot, especially when navigating risks like dividend cuts or sector shifts. 

Although passive dividend ETFs still attract more investor flows due to cost advantages, actively managed funds are slowly gaining traction, particularly among investors seeking income stability amid rising macroeconomic uncertainty. 

Finsum: For those dependent on income—like retirees—dividend strategies remain appealing, but experts caution that yield alone shouldn’t drive decisions.

The rise of fee-based annuities is accelerating as insurance firms respond to evolving regulations, especially in light of the Department of Labor’s fiduciary rule. These products, which charge transparent annual fees instead of embedded commissions, are designed to better align with client interests and reduce potential conflicts. 

However, while fee-based annuities may suit some investors, others—particularly long-term holders—might benefit more from commission-based options due to lower lifetime costs. 

Commissionable annuities, despite carrying higher built-in expenses, can eliminate ongoing advisory fees and may be better suited for clients who need less active management. Choosing between the two depends on several factors, including the annuity's fee structure, potential need for liquidity, and whether features like living benefits are added. 

Finsum: Ultimately, advisors and clients must carefully weigh these trade-offs to determine the best fit based on individual goals, timelines, and financial preferences.

In March, U.S. equity markets retreated sharply, driven by renewed tariff tensions and mounting economic uncertainty, marking their steepest monthly losses since 2022. International stocks, however, maintained their relative strength and continued to outperform the S&P 500 on a year-to-date basis. 

This environment reinforces the importance of active management in fixed income model portfolios, where careful duration and credit positioning can help mitigate downside risks while still capturing income opportunities. 

Dividend-focused equities stood out as a resilient segment, benefiting from their tilt toward defensive sectors amid market volatility. Fixed income returns were subdued overall, with longer-duration bonds and lower-quality credit coming under pressure from rising stagflation concerns. Income portfolios remain positioned defensively, emphasizing quality income sources across asset classes to navigate a more uncertain economic landscape.

Finsum: Investors are favoring income-generating assets with stable cash flows as risk sentiment declined.

Annuities offer retirees a steady income stream, with fixed annuities providing guaranteed interest rates during the accumulation phase and predictable payouts in retirement. 

April 2025’s top fixed annuities include: Gainbridge’s SteadyPace at 5.80% over five years, Reliance Standard’s 5.00% option, and higher-premium offerings like MassMutual’s Premier Voyage 5, which reaches up to 4.90% for $1M+ investments. 

Rates generally vary by premium size and contract length, with most products requiring $10,000–$100,000 minimums and terms of three to five years. Fixed annuities also offer tax-deferred growth and can be customized with features like survivor or death benefits. However, higher returns often require larger upfront investments, and early withdrawals can trigger penalties. 

Despite their complexity, fixed annuities remain a useful tool for generating reliable retirement income, particularly for those seeking stability, tax deferral, and no contribution limits.