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Multi-Asset Model Portfolio Works for Income Investors

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With income becoming harder to generate via traditional sources, advisors may want to consider a multi-asset approach to bolster equity and fixed income-laden portfolios.

A good place to start is with the Global Multi-Asset Income Model Portfolios, which are part of WisdomTree’s menu of Modern Alpha Model Portfolios. Within the Global Multi-Asset series, there seven portfolios for advisors to consider, ranging in risk tolerance from very conservative to very aggressive, ensuring there’s something for a variety of client risk profiles.

“Designed to help maximize income, offer capital appreciation potential and reduce volatility, this strategy typically provides exposure to a diversified allocation of dividend-focused stocks and yield-focused bonds using ETFs with global exposure,” according to WisdomTree. “The strategy may include both WisdomTree and non-WisdomTree ETFs. These model portfolios were previously known as Income Model Portfolios.”

Multi-Asset Matters

Low yields and coronavirus fears are certainly making a formidable roadblock when it comes to fixed income investors, but there are still some income-generating opportunities as well as multi-asset strategies that investors can utilize.

The moderate mutli-asset model portfolios offered by WisdomTree has a 60% weight to equities, which is comprised of 10 ETFs, many of which are dedicated dividend or income strategies. The remaining 40% is allocated to seven fixed income ETFs addressing various bond asset classes of varying credit qualities and maturities.

“The early September weakness in certain tech names that had been fueling the bulk of the U.S. rally reminds us that the recovery is not cemented, and downside asymmetry exists in many areas,” according to BlackRock. “While we continue to favor credit, a similar comment could be made where chasing higher yields in lower quality areas may lead to disappointment if volatility and uncertainty rises. As such, we maintain a high level of scrutiny in our credit selection.”

One of the holdings in this model portfolio is the WisdomTree Mortgage Plus Bond Fund (NYSEArca: MTGP). MTGP is a unique, active approach to mortgage-backed securities (MBS).

MBS are created when an entity acquires a bundle of mortgages and then sells the securities. Most MBS are seen as “pass-through” security where the principal and interest payments are passed through the issuer to the investor.

MTGP is an actively managed ETF primarily investing in agency residential and commercial mortgage-backed securities while having the flexibility to diversify into other sectors of the securitized debt market. The fund is sub-advised by Voya Investment Management Co., LLC (Voya IM).

For more on how to implement model portfolios, visit our Model Portfolio Channel.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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