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ETF Specialist

High-Quality Income ETF at a Low Price

Investors have shunned stocks, creating opportunities for those with underweightings in equities.

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The Federal Reserve's liquidity programs and their pledge to keep short-term rates low until the economy shows substantial improvement have brought down short- and intermediate-term bond yields, forcing income-oriented investors to look for yield in segments of the bond market that have traditionally been viewed as riskier. Last year, investors put $33 billion in high-yield bond open-end funds and exchange-traded funds. But at this point, yields on high-yield bonds have reached historical lows, as highlighted in this article by my colleague Timothy Strauts.

Meanwhile, investors have shunned equity risk, pulling $65 billion out of U.S. stock funds last year, despite the fact that large-cap U.S. stocks currently offer a decent dividend yield and have strong balance sheets that should help support that dividend or provide a boost to earnings through share buybacks. Those income-oriented investors who have underweightings in equities should consider a contrarian approach and invest in high-quality, large-cap stocks. 

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Michael Rawson does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.