Remember, SDY is not about having a high, flashy yield (currently at 2.45%), but about a stable dividend based on some of the most consistent payers in the world. Those looking for a high yield/higher risk option would be better served elsewhere.
4. iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB)
Certainly the riskiest fund on this list, EMB offers a broad range of debts tied to emerging markets. This allocation would be for investors who simply do not trust the U.S. and its ability to pay off its debts. With the national debt just breaking through the $17 trillion mark, it would be hard to blame these investors. While emerging markets do carry an aura of risk, some investors feel more comfortable with their funds overseas than at home.
The fund is currently yielding 4.2%, but it should be noted that just 60% of its holdings are investment grade. As such, this play is for those who can stomach a fair amount of risk. Investors should also note that its performance relative to its peers has been weak in 2013, but that may present a buying opportunity for those interested.
5. iShares Floating Rate Bond ETF (FLOT)
For those who have a longer time horizon, rates are a big point of concern. With rates at all-time lows, many fear that their inevitable rise could send bonds into a bear market. However, a floating rate product has far less interest rate sensitivity than its peers, making it an ideal choice in an environment with tumultuous rates.
FLOT will make for a good alternative to long-term Treasuries that have the potential to be heavily suppressed if and when rates eventually rise. The fund charges just 20 basis points and has more than $3.7 billion in assets. One thing to note—and it may be a deal breaker for investors who remain wary of the financial space—is that FLOT invests more than 50% of its assets in financials.
Jared Cummans writes for ETFdb, which offers a comprehensive and original ETF database and analytical consulting services for advisors and investors, as well as a free newsletter. Learn more about their services by visiting ETFdb.com. Disclosure: the author had no positions in the securities named in this article at the time of writing.