Using ETFs To Build A Sustainable Muni Portfolio

January 23, 2017

 

Using ETFs To Build

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A laddered portfolio can be assembled with as high or low duration as the investor wants or needs.

Barbell Portfolio Strategy

Investors who want to retain some tactical flexibility for a rising rate environment may wish to consider a barbell portfolio strategy. This is a variation on the ladder, but instead of having bonds mature every year, the money is split into short and long maturity investments that average out to the same (or similar) target maturity as the ladder strategy; for example, by halving a $1 million portfolio into short and long “buckets.”

In this way, if rates go lower, half of the portfolio benefits from having been invested at higher rates. But if rates go higher, when the shorter bonds mature, the principal can be reinvested at higher rates.  A barbell portfolio can also be implemented with ETFs by weighting the durations of each fund or using target-date ETFs.

Using ETFs To Build

For a larger view, please click on the image above.

 

These hypothetical portfolios are not intended to suggest a specific solution for any investor.

 

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