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iShares Floating Rate Index ETF (XFR $20.06)
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PIMCO Income Strategy Fund Shares of Beneficial Interest (PFL $8.33)
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iShares Flexible Monthly Income ETF (XFLI $39.69)
I'm contemplating shifting some to xfli (5.7%) and pfl:US (11.6 %) for the enhanced yield to result in a double and quadruple in monthly income
I understand there is more "risk" (interest rates, and some leverage with pfl), however,
I feel that the reward far out weighs the risk in order to increase monthly income
What do you see as a worst case scenario. I look forward to your comments.
Thank you so much
XFLI is a global fixed-income fund, owning units in BINC. The main risk is interest rates, but with an effective duration of just over three years, this should not be a huge risk (short term bonds react less to rate movements). The US is 57% and corporate bonds are 48%. A recession could change corporate bond prices but again, short term maturities help this. Worst case scenario would be stagflation, with low or negative economic growth and a spike in interest rates. But we would consider it generally conservative. PFL's website does not mention leverage. Its interest rate risk is alleviated by both its short maturities (3 years or less) and its laddered approach. It also owns floating rate securities so even a spike in rates would not be so bad. It is all government bonds, so there is far less credit risk, just rate risk. Distribution yield is in the 10% range, 5-year annualized return is 8.55%. We would consider it safe for fixed income investors. Worst case here is probably an inflation spike, where it might take a while for the fund to adjust and floating rates are not reset immediately.