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Is it Time to Bet on These Multi-Asset ETFs?

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Though the broader market climbed the wall of worry to start 2017 thanks to the Trump rally and a rebound in global economies, the deterrents are still rearing their ugly heads. Definitely, the U.S. economy is on the right track leading the Fed to be confident enough to enact two rate hikes in the first half of 2017.

But soft retail sales, still-sluggish inflation figures, dismal May job data, renewed worries in the oil patch and occasional political gridlocks that may come the way of Trump’s proposed reforms are concerns (read: 5 ETFs & Stocks: Silver Lining in Soft May Retail Sales).

Plus, Brexit blues may resurface anytime. Most central banks are extremely dovish on boosting growth of their respective economies. Japan and the Euro zone are practicing negative rates along with massive monetary stimulus.

All in all, the U.S. economy is on the mend, but still has a long way to go and can even derail if oil issues flare up. Plus, stocks are deemed to be overvalued by several analysts. After a stupendous rally by U.S. equities post Trump’s election, it’s not surprising that investors and market watchers will mull over how highly priced the broader market is (read: Are Stocks Really Overvalued? ETFs to Buy).

Investors should note that U.S. Treasury yields remained at moderated levels despite the ongoing rate hike. On June 22, 2017, the U.S. benchmark Treasury yield was 2.15%, reacting to economic uncertainty.

Should You Diversify Through Multi-Asset ETFs?

In such a situation, uncertainty may pull the strings of both equities and bonds’ investing. As a result, diversification may earn investors some surety in terms of returns with lower risks. Thankfully, there are some multi-asset ETF products, which can help investors overcome these challenges (read: Multi-Asset ETFs to Counter Volatility).

Notably, the multi asset strategy looks to boost returns and lower overall volatility in the portfolio. These products normally provide a high level of current income and shun downside risks of a specific asset class at the same time. These products cater to various asset classes (equity, fixed income, and alternative securities), which have low correlation to each other.

Below we highlight a few multi-asset ETFs that could offer investors great returns in the form of capital appreciation and income.

International Multi-Asset Diversified Income Index Fund YDIV

This 129-security fund seeks to follow the performance of the NASDAQ International Multi-Asset Diversified Income Index. Among the asset classes, dividend-paying equities take the top spot at nearly 21.6% closely followed by fixed income ETFs (20.6%) and preferred securities (20.2%). YDIV charges 78 bps in annual fees. The fund yields about 4.80% annually (as of June 22, 2017). It added over 14% in the last six months (as of June 22, 2017).

YieldShares High Income ETF YYY

This fund definitely has a high expense ratio of 1.72% but yields about 8.36% annually. The fund holds 30 closed-end funds ranked the highest by the ISE on the basis of three criteria namely fund yield, discount to net asset value and liquidity. Around 75% of the fund is targeted at debt securities while the rest are in equities (read: High Income ETFs Worth Their High Costs).

Principal EDGE Active Income ETF YLD

The fund is actively managed and does not track an index. It has a net expense ratio of 65 bps. The fund has a tilt toward U.S. bonds (61.63%) while U.S. stocks make up about 24.37% of the fund. The fund added about 5.3% in the last six months (as of June 22, 2017). The fund yields about 4.79% per annum (as of June 22, 2017).

iShares Core Moderate Allocation ETF AOM)

AOM focuses on the performance of the S&P's proprietary moderate target risk allocation model. The product has 56% bond holdings and the rest is invested in equities. Geography-wise, U.S. has about 63.1% weight followed by Japan (5.62%) and U.K. (3.98%).

AOM charges investors 25 basis points a year in fees and has top holdings in iShares Core Total USD Bond Market ETF IUSB (28.73%), iShares Core S&P 500 ETF (IVV - Free Report) (20.6%) and iShares Core U.S. Treasury Bond ETF GOVT (11.04%). It yields about 2% annually.

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