Is Now The Time To Look At Floating-Rate Bonds?

In light of the Federal Reserve's persistent zero interest rate policy, many investors have traveled further down the risk/return spectrum in order to improve yields on their portfolios. Anybody that's dabbled in MLPs or high-yield bonds over the past two years probably knows very well the risks that come with reaching for yields. The ALPS Alerian MLP ETF (NYSEARCA:AMLP) is 40% off of its recent high while the high-yield bond index is down over 20%.

 

Now that the Federal Reserve has finally begun moving away from its zero interest rate policy and rates are slowly on their way back up, it might be time to focus more on principal preservation instead of yield maximization. Staying on the short end of the yield curve can certainly help accomplish that task, but floating rate bonds should also be a consideration.

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