There have been a slew of articles already in 2013 warning investors who have piled into fixed-income funds about the dangers of rising interest rates. Yet there are steps ETF investors can take to protect themselves from higher yields and lower bond prices.
For example, some experts are advising fixed-income investors to take shelter in high-yield bonds, bank loans and emerging market debt.
“Wall Street is in the process of turning one of its most plain vanilla investments – and one that average investors have flocked to in recent years because of its perceived safety – into ticking time bombs,” Fortune said in a recent story on bond funds. “Many market gurus say that this may finally be the year that interest rates, which have been at historic lows, march up.”
Bond prices and rates move in opposite directions.