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October 06, 2013 at 03:43 PM
ETFs can play a major role in retirement planning, especially with income-generation issues stemming from rising interest rates — something Ron DeLegge calls a major problem.
“We had a 55% surge in the 10-Year Treasury yield in the past year,” the editor of the ETF Guide notes with a shake of his head. “We’ve gone form 1.6% to over 2.5%. Despite the increase, people are still scraping for yield.”
According to DeLegge, it all comes down to a need for income alternatives to dividends from stocks and bonds, and he has a few suggestions as to where said alternatives can be found.
“Selling covered calls are one,” he begins. “Advisors should be familiar with them and have them in their arsenal. They are an incredibly powerful tool that are certainly not for every client, but can be effective when combined with, say, fixed income.”
One strategy he decidedly does not like involves target-date funds, noting they’re sold as a “panacea” for everyone.
“I like taking on the consensus with this one,” he chides. “We’re told to simply pick one or a couple of target-date funds and you’ll be fine. Nothing could be further from the truth.”
