Cautious investors piling into cash may want to consider other options.
According to Matthew Bartolini of SPDR Exchange Traded Funds, active management can also provide them with stability and income by creating more opportunities to succeed.
“Active fixed income has been a really consistent engine of support within the active (ETF) construct — not just flows but also returns,” the firm’s managing director and head of research told CNBC’s “ETF Edge” this week.
Bartolini claims that not only do they give investors more flexibility, the strategies also provide consistent performance and improved tax efficiencies.
He also believes that the forward-looking returns look better than in the past.
“But with higher returns comes higher volatility,” added Bartolini, who sees big returns from active management. “The thing we keep coming back to with investors (is) about creating portfolios that can generate income returns while maximizing the amount of risk they take to get those because yields are high.”
Bartolini warns that cash carries its own set of risks.
“On the cash side of the market, that income is not going to be as stable as it once was because of reinvestment risk,” he said.
“Very hard to get people to think about bonds”
Dan Egan, vice president of behavioral finance and investing at robo-advisor Betterment, said it was “very, very difficult” to get investors out of cash.
“It’s very hard to get people to think about bonds when you can get that with no risk,” he said. “Don’t forget that FDIC insurance plays a very big role in people’s sense of security.”
Betterment’s website as of Friday shows its variable high-yield cash account pays 4.75% APY. It also gives new customers a promotional rate of 5.50% for three months.
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