At this point it's no secret that investors have been craving new income solutions. With the Federal Reserve continuing to keep interest rates at historical lows, traditional sources of income including CD's, money market funds and bond funds like the iShares Barclays 7-10 Year Treasury (ARCA:IEF) have all but dried-up in this new environment. To that end, investors have plowed billions into various other sectors and assets in order to gain a little more yield. However, managing a complex income plan can be a daunting task. Securities including REITs and MLPs, along with hybrid bonds like convertible bonds, all come with their own unique challenges and advantages. Luckily, the exchange-traded fund (ETF) boom has you covered.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Income Allocation
With more investors searching outside the norm for various sources of income, Wall Street has come to the rescue with a variety of new products designed to make managing those assets easier. Investment staple balance funds--which blend both stocks and bonds--have received a new face lift. These new multi-asset plays, include weightings to junk bonds, emerging market stocks, preferred stocks and even real estate and pipeline partnerships, as well as exposure to traditional stocks and investment-grade bonds. Ultimately, these new funds can serve as a one-stop shop for diversified income exposure and address a portfolio's need for higher and stable income.

SEE: 5 Popular Portfolio Types

At their core, these new multi-asset income funds strive to provide high income relative to traditional metrics, long-term capital appreciation and diversification with lower volatility. Additionally, the new ETFs eliminate some of the complexities of holding some of these asset classes individually. For example, investors holding individual MLPs like Magellan Midstream (NYSE:MMP) are considered limited partners and receive K-1 statements. That can be a headache come tax time. The new funds are able to pass through most of the MLP distributions to shareholders as return of capital or ordinary income without K-1 statements.

SEE: 5 Ways To Save On Investments

A Look Under the Hood
While the multi-asset income sector is fairly new, there has been an impressive amount of launch activity as of late and there are now five to choose from. However, each one sticks to its own investment style, collection of assets and risk profiles. It's important to look under the hood of each to determine which fits best in your portfolio.
The oldest in the category is the Guggenheim Multi-Asset Income (ARCA:CVY). Launched in 2006, the fund features holdings in a number of different asset classes, including common stocks, REITs, closed-end funds, MLPs, preferred stocks and Canadian royalty trusts. Top holdings include Pengrowth Energy (NYSE:PGH) and BlackRock Build America Bond Trust (NYSE:BBN). The diversity of holdings helps the fund produce a strong 5% yield. Guggenheim also offers an international version, with its International Multi-Asset Income ETF (ARCA:HGI).

SEE: 3 Steps To A Profitable ETF Portfolio

Two of the new ETF launches take a "fund of funds" approach to multi-asset income. Both the SPDR SSgA Income Allocation ETF (ARCA:INKM) and the iShares Morningstar Multi-Asset Income (BATS:IYLD) will invest in other ETFs issued by respective sponsors. The iShares fund is currently the more conservative option with nearly 60% in fixed income holdings like the iShares iBoxx $ Invest Grade Corp Bond (ARCA:LQD). The fund rounds out that exposure with a 30% to U.S. dividend paying stocks via the iShares Dow Jones Select Dividend ETF (ARCA:DVY). The SPDR takes a different approach and uses active management to achieve its goals and only features a 40% weighting to fixed income securities.

Finally and perhaps the riskiest of the category is the Arrow Dow Jones Global Yield ETF (ARCA:GYLD). Instead of betting on other funds, the ETF holds individual securities across a variety of asset classes. That includes hefty weightings to global equities, global real estate and energy-related issues like MLPs and CANROYs.

SEE: An Introduction To Canadian Income Trusts

The Bottom Line
With more investors looking for income in non-traditional asset classes, managing all of those moving pieces is getting complicated. Luckily, the ETF boom is there to help. Wall Street has recently unveiled a series of multi-asset income funds designed to produce high yields from a wide range of sources.

At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Chart Advisor

    Bumpy Roads Ahead In Transportation

    Investors are keeping an eye on the transportation industry. We'll take a look at the trend direction and how to trade it.
  2. Investing

    How ETFs May Save You Thousands

    Being vigilant about the amount you pay and what you get for is important, but adding ETFs into the investment mix fits well with a value-seeking nature.
  3. Mutual Funds & ETFs

    3 Fixed Income ETFs in the Mining Sector

    Learn about the top three metals and mining exchange-traded funds (ETFs), and explore analyses of their characteristics and how investors can benefit from these ETFs.
  4. Mutual Funds & ETFs

    Top 3 Commodities Mutual Funds

    Get information about some of the most popular and best-performing mutual funds that are focused on commodity-related investments.
  5. Chart Advisor

    Agriculture Commodities Are In The Bear's Sights

    Agriculture stocks have experienced strong moves higher over recent weeks, but chart patterns on sugar, corn and wheat are suggesting the moves could be short lived.
  6. Investing News

    Top Tips for Diversifying with Mutual Funds

    Are mutual funds becoming obsolete? If they have something to offer, which funds should you consider for diversification?
  7. Professionals

    Top Stocks to Short, Go Long On to Beat the Market

    A long/short portfolio can help weather a variety of market scenarios. Here's how to put one together.
  8. Mutual Funds & ETFs

    Top 4 Asia-Pacific ETFs

    Learn about four of the best-performing exchange-traded funds, or ETFs, that offer investors exposure to the Asia-Pacific region.
  9. Mutual Funds & ETFs

    Top 3 Japanese Bond ETFs

    Learn about the top three exchange-traded funds (ETFs) that invest in sovereign and corporate bonds issued by developed countries, including Japan.
  10. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  1. How can insurance companies find out about DUIs and DWIs?

    An insurance company can find out about driving under the influence (DUI) or driving while intoxicated (DWI) charges against ... Read Full Answer >>
  2. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  3. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  4. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  5. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  6. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!