Why Preferred Shares Will Be Fine When Rates RiseBrett Owens, Chief Investment Strategist
Updated: October 27, 2015
Many investors are concerned that high yielding preferred shares will not perform well in a rising rate environment. I’ve heard from several readers who share these sentiments. Since April 1st, ETFs like the PowerShares Preferred Portfolio (PGX) and the iShares S&P U.S. Preferred Stock Index Fund (PFF) are down 2% and 3.7% respectively.
These fears are overblown for a couple of reasons:
- It’s unlikely that interest rates are going to rise high enough to make these yields unattractive in relative terms anytime soon.
- These days, more preferred shares have floating rates anyway.
Not familiar with preferred shares? You’re not alone – most investors only consider “common” shares of stock when they look for income.… Read more