Create Better ‘Barbells’ With Bond ETFs

Many investors expect the return streams from bond ETFs to behave like the direct purchase of a bond, essentially providing current income with the likely return of principle at a future date.  Although the expansion of ETFs has provided investors access to bonds, and at a reasonable cost, the performance behavior of these ETFs are often very different from the direct purchase of individual bonds.  This Commentary introduces the Risk Adjusted Excess Income Ratio and illustrates its effective use in creating an Income Barbell portfolio.

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