Displaying items by tag: fixed income

With persistently high interest rates, investors are increasingly turning to fixed-income separately managed accounts (SMAs) for their potential tax advantages and personalized portfolio options. SMAs give investors direct ownership of underlying securities, offering greater control over capital gains, tax-loss harvesting, and tax-efficient investment selection. 

Fixed-income SMAs can minimize tax liabilities through strategies like low portfolio turnover, selective tax-loss harvesting, and investment choices based on location-specific tax exemptions. 

While tailoring portfolios for various client types, portfolio managers must balance customization with operational efficiency to meet expectations and maintain consistent performance. The key is to achieve tax efficiency without compromising on investment goals or client-specific outcomes.

Finsum: Investors should think of the tax advantages as additional returns their accounts can optimize for their portfolio.

Investors are increasingly flocking to US government bond ETFs as anticipation grows for a Federal Reserve interest rate cut in September. BlackRock's TLT, the largest ETF for long-dated Treasury bonds, saw nearly $4 billion in inflows from early August through Monday, marking one of its highest monthly inflows since inception. 

This surge indicates a resurgence in bond interest following a period of weak returns and significant outflows in 2022. As economic slowdowns push investors towards safer fixed-income options, bond yields have dropped in response to the Fed’s potential rate reductions. 

Retail and institutional investors alike are rediscovering bonds, with $12.2 billion flowing into US sovereign bond ETFs in August alone. The overall bond market's revival is evident, with taxable bond funds and ETFs attracting over $280 billion in the first seven months of the year, surpassing the total inflows for 2023.

Finsum: Holding bonds as interest rates fall and their prices rise sems to be one of the classic strategies that we haven’t been able to leverage on this scale in a long time.

Amplify ETFs has launched the Amplify CWP Growth & Income ETF (QDVO), further expanding its suite of income-focused funds. QDVO aims to deliver high total returns by strategically investing at least 80% of its assets in growth-oriented U.S. equities, while also generating high monthly income through an opportunistic covered call writing strategy. 

This approach targets around 4-6% income from option premiums and up to 2% from dividends. QDVO is designed to complement Amplify's other successful ETFs, DIVO and IDVO, offering a diversified strategy for optimizing portfolios in various market conditions. 

The ETF seeks to provide investors with a balanced approach to growth and income, making it an attractive option for those looking to enhance their portfolios.

Finsum: Pairing income with an active ETF might make the most sense as we head into the final bout with inflation in the fall.

Investing in bonds has gained popularity, facilitated by platforms like Webull and Public. Bonds come in three main types: U.S. Treasury bonds, corporate bonds, and municipal bonds, each with distinct tax implications. 

U.S. Treasury bonds are state and local tax-exempt, corporate bonds are fully taxable, and municipal bonds often enjoy federal and state/local tax exemptions. Credit quality is vital, with investment-grade bonds rated BBB- or higher by S&P and Baa3 or higher by Moody’s. 

Comparing after-tax and taxable-equivalent yields helps investors decide the best options based on their tax brackets. Additionally, understanding the yield to maturity and coupon rates of bonds, such as those from can aid in making informed investment decisions

Finsum: Alternatively, ETFs and other products can make a wider exposure to bonds a little easier.

Vanguard, managing over $9 trillion in assets, favors high-rated corporate debt over riskier high-yield bonds to guard against potential economic downturns caused by high borrowing costs. 

Despite expectations of the Federal Reserve cutting rates by September due to cooling inflation and labor market weakness, Vanguard predicts rates will hold steady this year. 

High demand for investment-grade bonds has compressed credit spreads, but Vanguard's defensive strategy, along with its active fixed income management, is poised to perform well if the economy weakens, allowing for credit additions at more attractive prices.

Finsum: Active managers will be eyeing fall fed decisions closely as they have a huge impact on bonds.