Registered investment advisors looked for safety in their exchange traded funds in 2011, but this year they may be willing to take on more risk in the fixed income sector, said Charles Schwab & Co. analysts in an ETF update on Friday.
“We saw that Treasurys outperformed corporate bonds in 2011,” said Kathy Jones, a fixed income strategist in the Schwab Center for Financial Research. “This year, with more positive news out of Europe, people are taking on more risk and are not so interested in Treasurys.”
Last year, utilities outperformed the financial and banking sector, but this year, financials offer attractively high yields relative to safer sector bonds, Jones said.
She advised against investors taking on too much risk in municipal bonds, however, warning that a drop in quality is less likely to pay off in munis.
Jones also encouraged investors to start moving cash back into the market.
“If you have a lot of money sitting in cash, there’s a high cost to waiting on the sidelines,” she said. “You’ll have to take more risk to catch up. Our theme is that it’s time to start catching up.”