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5 Funds to Buy for Rising Interest Rates

Protect yourself through a number of fixed-income strategies

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PIMCO Low Duration Fund/DoubleLine Low Duration Bond Fund

PIMCO185Conservative investors not looking to hedge existing positions, but simply lower their risk and exposure to interest rates, should consider a low-duration bond fund.

Although not completely immune to forces at work in the fixed income markets, low-duration bond funds simply offer lower risk in exchange for lower reward. The yield and volatility of these vehicles are roughly half their intermediate duration brethren. This option could present an excellent safe harbor for retirees or minimum-volatility seekers that aren’t concerned with a few months of reduced coupon payments.

Two funds that I favor in this space are the DoubleLine Low Duration Bond Fund (DBLSX), and the PIMCO Low Duration Fund (PTLDX). Both options present competitive fees, excellent diversification and great track records. The current SEC yield of each fund is 1.69% and 0.69%, respectively.

An excellent strategic approach to making use of low-duration funds is simply holding them while you wait for rates to ultimately rise to levels that present lower prices and higher yields. Then elongate duration through an intermediate- or long-term bond fund. This strategy could work great if timed precisely, thereby increasing your yield once interest-rate volatility subsides.

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