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Yahoo
03-07-2025
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This income fund pays more than a bank account while keeping price volatility low
Laura Mayfield of Fort Washington Investment Advisors specializes in asset-backed securities (ABS) — a space that offers opportunities that might be overlooked by income-seeking investors. She co-manages funds designed to keep volatility risk at a minimum while providing yields that are higher than investors can get at their bank or in money-market funds. Fort Washington Investment Advisors subadvises for the $822 million Touchstone Ultra Short Duration Income Fund, which we will call the mutual fund, and the $172 million Touchstone Ultra Short Income ETF TUSI, which was established in August 2022. S&P 500 just saw its first 'golden cross' in more than 2 years. Here's what comes next. My wife and I have $7,000 a month in pensions and Social Security, plus $140,000 cash. Can we afford to retire? My wife and I are in our late 60s. Do I sell stocks to pay our $30,000 credit-card debt — or do it gradually over 3 years? 'Finance makes me break out in hives': I inherited $240K from my parents. Do I pay off my $258K mortgage and give up my job? 'Today is my 61st birthday': I have my ex-spouse's Social Security benefits. Should I retire at 65 and travel? Fort Washington Investment Advisors and Touchstone Investments are based in Cincinnati and are both subsidiaries of Western & Southern Financial Group. The mutual fund has six share classes with varying annual expenses and account minimums, and are distributed in different ways. The Class Y shares TSYYX are available through some investment advisers and are rated four stars (the second-highest rating) within Morningstar's 'Ultrashort Bond' category. This share class has annual expenses of 0.46% of assets under management; however, there is a partial expense waiver so that the expense ratio will be 0.40% until at least Jan. 29, 2026. In this article, we'll focus on the Touchstone Ultra Short Income ETF. It has an annual expense ratio of 0.52%, but there is a partial expense waiver, so the expense ratio will be 0.25% until at least April 29, 2026. In June, David Sherman, who co-manages the CrossingBridge Low Duration High Income Fund CBLDX, said that the fund was appropriate for investors who could commit for periods of between one and three years. At that time, that fund's duration-to-worst was 0.77 years. Read: How to select bond funds based on your investing needs and time horizon Duration is a measurement of volatility, expressed as a number of years. It indicates how much a bond portfolio's market value can be expected to move in the opposite direction of interest rates. A duration of one would indicate that a portfolio's market value would decline 1% if interest rates in the economy were to rise 1% and vice versa. Investors can take an even more conservative approach to volatility with an ultrashort income fund. The Touchstone Ultra Short Income ETF had a weighted average effective duration of 0.6 years as of March 31. During an interview with MarketWatch, Mayfield said six months was 'the minimum we would recommend' for investors in the ETF for the income to make up for any price volatility. 'When we think about the ultra short duration category, the way we manage it is that it is tailored toward cash or money-market investors who would like a little more return with a little higher risk appetite,' she said. TUSI is managed for total return, Mayfield said. It makes monthly distributions to shareholders that are calculated to encompass discounts or premiums paid by the fund when it buys securities, and reflects variable interest rates and amortization for some securities. To put it a different way, Mayfield said that some individual investors 'are focused on the dividend-yield return, but some might be leaving some money on the table.' This chart shows the fund's total return for one year through June 30, compared with the return for the ICE BofA U.S. Treasury 1- to-3-month index: For one year through June 30, the Touchstone Ultra Short Income ETF's total return was 5.79%, while the average return for Morningstar's U.S. Fund Ultrashort Bond fund category was 5.33%. Another comparison could be made with the 4.76% return for Morningstar's U.S. Fund Money Market Taxable Index for the same period. All investment returns in this article include reinvested income distributions. The chart provides a good example of the type of volatility TUSI shareholders can experience. The largest decline over the past year was from April 3, the day after President Trump made his 'liberation day' tariff announcements, through April 11. The ETF's share price declined by 0.39% during that eight-day period. So this type of fund will have price volatility, where money-market funds are designed to maintain stable share prices of $1. Mayfield said that while the ETF follows the same underlying investment strategy as the mutual fund, it can have high-yield securities making up as much as 15% of the portfolio. High-yield bonds or other income securities are those rated below-investment-grade by ratings firms such as S&P Global Ratings or Moody's. You can read S&P's explanation of its ratings hierarchy here and about the Moody's rating scale here. And Fidelity also provides a guide, lining up the agencies' ratings next to each other. The highest bond ratings are AAA at S&P and Aaa at Moody's. The lowest investment-grade ratings for bonds at these firms are BBB- for S&P and Baa3 at Moody's. While the TUSI portfolio is mainly investment-grade, Mayfield stressed that most securities it buys, including securitized loans, aren't available to individual investors in the secondary market. About 35% of the fund is made up of asset-backed securities, with about 20% in 'short high-quality commercial mortgage-backed securities,' between 6% and 8% in residential mortgage-backed securities and between 20% and 25% corporate credit, which includes bonds and securitized loans. As she manages the portfolio to have a short duration, some investments feature a 'straightforward return calculation,' such as an investment-grade bond with one year left until maturity. She will pay a small premium to face value or a slightly discounted price, which is baked into the return calculation. The specialty work is done with asset-backed securities. For example, if she is looking at a five-year bond backed by auto loans, 'we have principal amortization as the car loans pay down, but the amount of amortization varies greatly. There are many factors that affect the timing of repayment.' And some fund managers who are running longer-duration portfolios will need to sell these securities as they near maturity. 'When [the bonds] go to less than a year, they are thought of as cash substitutes. And many managers must trade out to keep in line with their duration targets,' Mayfield said. 'So these securities can be sold somewhat haphazardly. That is gold to me,' she added. Mayfield continued: 'We manage a $22 billion securitized portfolio. We have resources to get very granular with the cash-flow modeling. We can identify premiums and discounts and apply cash-flow models and find opportunities for discounts.' Those discounts can enhance the ETF's return well above its income distribution rate. Within the asset-backed space, Mayfield stressed the importance of understanding behavior. 'The consumer is volatile and seasonal, especially as you go down the spectrum' of credit scores, she said. This means that during the holidays, default rates on auto loans will increase, while default rates decline during tax-refund season. When asked to discuss a favored credit sector, Mayfield said, 'We actually like subprime auto ABS better than prime auto.' Anyone would expect loans to borrowers with weaker credit histories to command higher interest rates than loans made to borrowers with high credit scores. But what is so attractive about subprime, according to Mayfield, is that the higher interest rates more than make up for the greater risk of default during periods of economic stress. She described Fort Washington's stress-testing of subprime auto loan pools, which she said used the global financial crisis of 2008-09 (GFC) as a guide. 'The base case might be 25% default' rates for subprime during a severe recession, she said, 'so we are not giving credit for that 25% right out of the gate.' The pooled subprime auto loans have interest rates ranging from 15% to 25%. 'During GFC, what we saw was that the loss multiple was 1.5 to 2 times. So going into GFC, loss expectations were 15%, we saw losses 1.5 to twice that level,' she said. Meanwhile, for prime auto loans, the expected loan default rates were 1% to 2%, she said. But during the GFC, the loss multiples were four to five times the normal levels. 'We don't get, in my view, an appropriate level of credit protection, for prime ABS,' she said. Going further, Mayfield pointed to credit features for auto ABS. 'We have some lenders that retain a significant portion of those loans on their balance sheets. They sell a portion of what they originate for the securitization,' she said. These issuers of securities backed by auto loans retain 'anywhere from 20% to 60%' of the credit risk tied to the loan pools, she said. 'It is meaningful and it gives us comfort they will not relax their underwriting standards for the sake of volume.' Mayfield wrote a detailed article about the history of auto financing and securitization, with a discussion of the current market for subprime auto MBS. Don't miss: Two ETFs that have beaten value stock indexes with this simple approach This income fund pays more than a bank account while keeping price volatility low Fourth of July holiday highlights 4 reasons 'American exceptionalism' isn't going anywhere I'm a stay-at-home mom. Do I take a part-time job to spend more time with my kids — or get a job for six figures? Now that the megabill has passed, expect a ton of short-term debt to be sold to finance the government's deficit 'My whole financial world is upside down': I'm 'medically retired' at 51 with $428K in stocks. Is this enough to live on? Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
02-07-2025
- Business
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Advisors Scrutinize Bill to Ease Rules for Accredited Investors
Being an accredited investor just isn't what it used to be. A bill designed to loosen the definition of an accredited investor, one who's eligible to invest in certain private placements, is heading to the Senate after it passed the House of Representatives in resounding fashion last week. Advocates say the proposal would democratize private markets — like private equity, venture capital, hedge funds and real estate — which have long been reserved for the wealthiest investors. The bill would ask the Securities and Exchange Commission to reevaluate the current definition and potentially provide a new one. It's yet another example of the industry opening up alternative products to Main Street investors. 'While this may be a step in the right direction for the asset managers, it remains to be seen if it is a step in the right direction for the new pool of potential buyers,' said Martin Gross, president of Sandalwood Securities. READ ALSO: 3 Financial Planning Urban Legends and Will Client Testimonials Catch On With Advisors? While the Fair Investment Opportunities for Professional Experts Act passed by a 397-12 vote in the House, it still has its detractors in the wealth management industry at large. Some financial advisors feel private offerings aren't necessarily the best idea for your average investing Joe. 'If there is no alignment of interests, clients should not invest,' Gross said. 'This is one area where understanding best practices around due diligence is essential.' Most notably, the bill would open up the designation to holders of certain licenses, education, or job experience, like brokers and financial advisors. Proponents say a new definition would welcome financially savvy investors who don't meet the traditional income thresholds. According to the current criteria includes: Investors must earn at least $200,000 (or $300,000 for married couples) in each of the prior two years. Or, they are required to have a net worth over $1 million, alone or together with a spouse. Anyone who holds a Series 7, 65 or 82 license. Advisors will also need to pay attention to the liquidity needs of their clients, the exposures they have in other asset classes, and risk tolerances, Gross said, adding that alternative investments come with levels of complexity and due diligence not required in public markets subject to the Investment Company Act of 1940, a law that protects investors by reducing conflicts of interest and improving transparency. Like it or not, current accredited investor rules exist for a reason, he said. Keeping it Accredited. Private markets are 'inherently complex and opaque,' and any new definition must focus on giving investors and investment managers the education and tools necessary to assess the risks, John Bowman, CEO of the CAIA Association, said in an email. Still, expanding the accredited-investor definition is long overdue. 'Sophistication is not solely a function of wealth and is a positive step toward democratizing access to private markets,' he said. We're still waiting on Congress to democratize access to vacation homes on the French Riviera. This post first appeared on The Daily Upside. To receive financial advisor news, market insights, and practice management essentials, subscribe to our free Advisor Upside newsletter.
Yahoo
28-06-2025
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CitiFX Review: Innovation, Market Impact Crucial for FX Vendors as Client Switching Declines
Citigroup Inc. (NYSE:C) is one of the undervalued S&P 500 stocks to buy according to hedge funds. On June 25, Citi announced the results of its fifth annual CitiFX Vendor Review, which is a comprehensive analysis of the foreign exchange/FX landscape based on internal vendor evaluations and an annual client survey. The review emphasizes the need for FX vendors to innovate and prioritize market impact considerations to remain competitive. 94% of clients underscored the importance of vendor adherence to the FX Global Code, while 85% stressed that vendors must consider market impact when developing execution tools. Client feedback indicates a high level of satisfaction with primary FX vendors, with 90% of respondents expressing contentment. A team of financial advisors huddled around a desk, discussing the best investment strategy for their client. However, 85% of these satisfied clients also have enhancement requests, primarily for execution and workflow solutions designed to mitigate operational and settlement risks. The increasing demand for innovative FX solutions has led to a notable decline in vendor switching. The rate of clients changing FX vendors has dropped from 51% in 2021 to 22% in 2025. Citigroup Inc. (NYSE:C) is a diversified financial services holding company that provides various financial products and services to consumers, corporations, governments, and institutions. While we acknowledge the potential of C as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the . READ NEXT: and . Disclosure: None. This article is originally published at Insider Monkey. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
18-06-2025
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Lincoln National Debuts Hybrid Growth Fund in Variable Annuities
Lincoln National Corporation LNC recently unveiled LVIP American Funds Vanguard Active Passive Growth Fund, a new investment option offered exclusively within its American Legacy and Lincoln Investor Advantage variable annuities. This fund leverages the expertise of two prominent investment managers, Capital Group and Vanguard, to deliver investors a thoughtfully balanced approach to long-term, diversified growth by integrating both active and passive investment strategies within a Lincoln variable annuity. Capital Group ranks among the world's most experienced active mutual fund managers, with $2.8 trillion in assets under management. Vanguard is one of the leading global investment managers and offers an extensive portfolio of both active and index-based investment products. The newly introduced fund is structured to manage downside risk while seeking upside potential by moving beyond simple index-based allocations. Capital Group applies a proactive, research-driven investment approach aimed at generating superior long-term, risk-adjusted returns. In parallel, Vanguard contributes a range of index-based exchange-traded funds (ETFs) that offer broad, cost-efficient market exposure. Lincoln National is responsible for the strategic asset allocation within the fund. The launch of this fund also seems to be a time-opportune one since a majority of financial advisors these days agree that active and passive strategies complement each other. They also believe that during periods of market volatility, active management offers valuable downside risk protection through tactical decision-making. Therefore, the active management component of the new fund is designed to enhance portfolio flexibility and resilience amid volatile markets. The recent initiative is expected to enhance the company's variable annuity offerings, which, in turn, can better support financial professionals and their clients. The addition of the fund will enhance the annuity business of Lincoln National and bring in higher sales through attracting new customers as well as retaining existing ones. Annuity sales advanced 33% year over year in the first quarter of 2025. LNC's variable annuities are designed to help individuals grow and safeguard their retirement income, offering a variety of investment options, features and benefits. These solutions, available at an additional cost, are tailored to support diverse client objectives and evolving financial needs. Variable annuities have remained a powerful tool for boosting future retirement income. Shares of Lincoln National have gained 6.3% in the past six months compared with the industry's 3.3% growth. LNC currently carries a Zacks Rank #3 (Hold). Image Source: Zacks Investment Research Some better-ranked stocks in the insurance space are Horace Mann Educators Corporation HMN, Voya Financial, Inc. VOYA and Kemper Corporation KMPR. While Horace Mann currently sports a Zacks Rank #1 (Strong Buy), Voya Financial and Kemper carry a Zacks Rank #2 (Buy) each. You can see the complete list of today's Zacks #1 Rank stocks here. Horace Mann's earnings surpassed estimates in three of the last four quarters and matched the mark once, the average surprise being 24.09%. The Zacks Consensus Estimate for HMN's 2025 earnings indicates a rise of 26.1% while the same for revenues implies an improvement of 6.6% from the respective 2024 figures. The consensus mark for HMN's 2025 earnings has moved 5.5% north in the past 60 days. The bottom line of Voya Financial beat estimates in each of the trailing four quarters, the average surprise being 38.39%. The Zacks Consensus Estimate for VOYA's 2025 earnings indicates a rise of 35.5% while the same for revenues implies an improvement of 11.4% from the respective 2024 figures. The consensus mark for VOYA's 2025 earnings has moved 1.6% north in the past 30 earnings outpaced estimates in each of the trailing four quarters, the average surprise being 21.11%. The Zacks Consensus Estimate for KMPR's 2025 earnings indicates a rise of 7.6% while the same for revenues implies an improvement of 7.5% from the respective 2024 figures. The consensus mark for KMPR's 2025 earnings has moved 1.3% north in the past 60 days. Shares of Horace Mann and Voya Financial have gained 6.8% and 0.5%, respectively, in the past six months. However, Kemper stock has dipped 1.2% in the same time frame. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lincoln National Corporation (LNC) : Free Stock Analysis Report Kemper Corporation (KMPR) : Free Stock Analysis Report Horace Mann Educators Corporation (HMN) : Free Stock Analysis Report Voya Financial, Inc. (VOYA) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
Yahoo
15-06-2025
- Business
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US boomers are using these 2 strategies to enjoy fat monthly cash flows — while their nest eggs stay protected
The 4% rule is pretty much the gospel for financial advisors and savvy savers. For decades, people planning for retirement have relied on this simple rule-of-thumb to calculate their ultimate financial target. The rule is a guideline that suggests retirees should withdraw 4% of their investment portfolio every year in retirement, with the option to make adjustments to account for inflation. This maximum withdrawal rate was believed to be a sure-fire method for stretching a senior's retirement income for 30 years or more. Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 6 of the easiest ways you can catch up (and fast) Nervous about the stock market in 2025? Find out how you can access this $1B private real estate fund (with as little as $10) But given how unpredictable the economy has been in 2025, the 4% rule might be insufficient if you're looking for long-term peace of mind. After all, the rule was created by financial advisor Bill Bengen all the way back in 1994 and relied on his analysis of stock market returns over the previous 30 years. Simply put, the 4% rule might be a little outdated in 2025. If you're looking for an alternative, the team at Vanguard recently offered two options. Here's a closer look at these updated retirement spending and withdrawal strategies, and why they could help you set a more realistic financial goal for retirement. Unlike the simple 4% rule, Vanguard's bucket strategy recommends splitting your assets into different categories depending on when you expect to spend the money. For instance, you could create an 'ultra-short-term' bucket that includes your checking account and emergency savings that can be tapped into for monthly living expenses. Another medium-term bucket could be set aside in relatively safe fixed income securities to meet spending needs — such as a home renovation — for the next two to three years. You can also use specialized tax-advantaged accounts, such as a Health Savings Account, to create a separate bucket for medical expenses. Finally, you can deploy the rest of your assets into long-term investments such as stocks or real estate to compound over time. By splitting your assets into different categories, you can adjust the risk-return profile on each so that they match the timeline of the expected expense. You can also customize these to meet your specific spending needs and lifestyle — for example, if you know you're facing major health concerns in the near-term, you can divert more of your wealth into that category. Simply put, this approach is more nuanced than the conventional 4% rule. That means it requires more planning — and perhaps the assistance of a financial advisor — to ensure you don't deplete your savings in retirement. Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says — and that 'anyone' can do it Another alternative to the 4% rule is the dynamic spending plan. Instead of simply assuming you will spend 4% of your assets every year in retirement, this strategy involves setting an annual budget based on how much your assets have earned over the previous year, how much inflation you expect, and what you want to spend money on in the year ahead. So, if your portfolio jumped 8% in value last year and inflation was at 2%, you can set a budget to spend 6% or less this year. You may also need to set a floor for annual spending if the stock market returns 0% or less in any given year. For instance, you could set a flat $40,000 budget for any down years in the stock market. In other words, you're not relying on an average estimate of stock market returns over several previous decades. Instead, you're setting a clear target for how much you want to spend every year based on the real returns and inflation you've experienced over the past twelve months. The advantage of this strategy is that it adapts to the economy and your personal circumstances in real-time. If the stock market had an exceptional year, you can spend more. If inflation was higher than expected, you can spend less. The upside is that your chances of running out of money in retirement are significantly lowered. Another upside is that this strategy allows you to create a customized financial target, which means you can potentially retire even if you have less than the $1.26 million that most Americans believe they'll need for financial freedom, according to Northwestern Mutual. The downside is that this strategy doesn't give you long-term visibility and needs effort and assessment on an annual basis. Again, hiring a financial advisor or using online tools to automate some of this process could help to make this a successful strategy for you. Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Robert Kiyosaki warns of a 'Greater Depression' coming to the US — with millions of Americans going poor. But he says these 2 'easy-money' assets will bring in 'great wealth'. How to get in now This tiny hot Costco item has skyrocketed 74% in price in under 2 years — but now the retail giant is restricting purchases. Here's how to buy the coveted asset in bulk Here are 5 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you? Like what you read? Join 200,000+ readers and get the best of Moneywise straight to your inbox every week. This article provides information only and should not be construed as advice. It is provided without warranty of any kind. Sign in to access your portfolio
