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Aside from presenting clients with a hard and fast date as to when stocks and bonds will cease faltering – a promise that should NOT be made – one thing advisors can due in the current environment is introduce clients to some alternative income strategies.
The reasoning is simple. Although equities are in a bear market, dividend yields on broader benchmarks are low. And although bond prices are faltering at the hands of rising interest rates, more rate hikes are coming, indicating there’s no need to embrace aggregate bond strategies today when pricing will likely be available in the coming months.
As ominous as those factors are – and they are – now is also an ideal time for advisors to discuss with clients hidden gems among income-generating ideas. One such option is the Strategy Shares Nasdaq 7HANDL™ Index ETF (HNDL).
I’ll more into more detail below, but a simplified explanation of HNDL’s methodology is a 50% allocation to stocks while the other half of the fund is dedicated to domestic bonds, equities and alternative assets that can generate above-average levels of income.
HNDL Methodology Matters
HNDL attempts to deliver a minimum monthly yield and it’s one sure to be alluring to clients.
“The Nasdaq 7HANDL ETF has adopted a policy to pay monthly distributions on Fund shares at a target rate that represents an annualized payout of approximately 7.0% on the Fund’s per-share net asset value on the date of a distribution’s declaration. All or a portion of a distribution may consist of a return of capital from the original investment and the distribution rate may be modified at any time,” according to Strategy Shares.
Simply because HNDL strives to deliver big income doesn’t mean it’s chock full of exotic, risky assets. Actually, the opposite is true. HNDL employs an ETF of ETFs strategy, meaning all of its holdings are other ETFs. That group is comprised of basic bond ETFs, dividend funds, a growth stock ETF and a real estate fund, among others.
Yes, that’s an income-heavy mix and it’s supposed to be that way. Additionally, HNDL delivers a monthly distribution, but its positive attributes don’t end there.
“The monthly distribution of the Fund is paid through a combination of income and return of capital. This non-dividend distribution component has the potential to provide favorable tax benefits,” adds Strategy Shares.
HNDL Worthy Consideration Today
The nifty thing about the 50% blend part of the HNDL portfolio is that it’s monitored on a tactical basis so while the ETF follows an index, its fixed income/alternatives sleeve won’t necessarily be static.
Something else to consider is that some HNDL’s current exposures, including growth equities, preferred stocks and broader bond funds, may be offering some value after struggling through the first nine months of 2022. All those perks are available under one umbrella without subjecting clients to undue credit risk.
“With traditional income, trying to generate enough yield often means exposure to excessive credit risk. However, HNDL’s distinct and diversified approach seeks to allow investors to meet their cash flow needs without taking on excessive credit risk,” concludes Strategy Shares.