More money flowing into fixed-income ETFs; Morningstar experts say that’s fine in moderation

Fixed-income ETFs make sense, but in moderation

CHICAGO — Investors have been increasingly pouring cash into exchange-traded funds specializing in fixed income. That gives them the quick-trading capability of ETFs while retaining the more conservative position of bonds.

Many financial analysts think the flight to safety is overdone. They say investors need to be in stocks for the long run in order to come out ahead of inflation.

But fixed-income ETFs can still represent a sound strategy, according to Morningstar’s experts. Just don’t put all your money there.

“If you’re not going to construct an entire portfolio around fixed income, I would still recommend them as a component of your portfolio — just for liquidity purposes,” Morningstar ETF strategist Paul Justice said at the company’s investment conference Thursday. “It’s money you can get ahold of when you need it.”

Thanks to the surge in growth, there are now more than 100 fixed-income ETFs, a relatively new category.

That’s not too many, a Morningstar panel suggested. Investing in fixed-income ETFs “makes a ton of sense,” said ETF analyst John Gabriel.

Investors should know, however, that the timing for the category may not be the best.

“There’s definitely less opportunity there than in equities,” Justice said. “But a lot of opportunities still make sense.”