Floating-rate bond funds offer an alternative yield source

Description

Abstract: When interest rates rise, bond funds can suffer. Certain fixed-income investment strategies may help investors manage the risk. Floating-rate bond funds — also known as bank loan funds or senior loan funds — are one option to consider. These funds invest in floating-rate bank loans, which are short-term debt instruments with a variable interest rate. These funds offer reduced interest-rate risk, but carry additional risks that should be carefully considered before investing. This article examines the benefits and the trade-offs.