PFFA: Consider This Actively Managed Preferred Stock ETF

2025-12-18 08:00:00 ET

In a recent article covering income investments for retirees or someone approaching retirement, I suggested that the asset class that includes Preferred securities might be one to consider. Reasons to invest in Preferreds include the higher yield income from what are mostly investment-grade holdings, potential for tax-advantaged income (for example, when held in a taxable account, the “qualified” tax rate on dividends is more favorable than the ordinary tax rate on interest), low correlations to stocks with more bond-like behavior, lower default risk because they are higher in the capital structure than common stocks and are generally issued by higher-rated firms, portfolio diversification, reduced interest rate risk (because they are callable and some can convert from fixed to floating rate or vice versa), and because preferreds offer lower volatility than equities....

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