iShares DEX Floating Rate ETF (XFR-T)

You want floating rates in your portfolio when yields are going up, as it mitigates the negative impact of prices changing. The floating nature means the coupons can set a lot more frequently than would a 10-year bond.

If you think about a series of 3-month bonds or other short-term securities, always giving you the current coupon when they roll over, as yields go up you're getting higher yields. But if you owned a 10-year bond over that window as yields were going up, the price of that 10-year would go down to adjust.

Right now, we're in an environment of cutting rates. So you would want to term out some of your debt. We missed a lot of that rally already. So right now, he wouldn't advocate having this in your portfolio. Make sure you don't look at the past yield and assume you're getting that going forward, because that's not the case. With yields going down, the coupons will reset lower to lower yields going forward.

Good if interest rates rise. Not when rates are falling. Would not invest lately (Fed likely to cut rates). 

Not good long term when interest rates will decline. Better to extend duration to capture the yield for a longer term. The reinvest risk is real and not an in-perpetuity investment.

He’s using instead of cash. Floating rate, doesn’t move around much. If interest rates in Canada rise, this will track up with them. Another defensive play.

Floating rate notes. Feels that floating rate securities have a role to play in a portfolio but doesn’t think they should be the entire fund. They are pretty much a guaranteed “round trip”. Over time, banks tend to raise rates then they stop raising rates and then they start to ease rates. This is the time you want to own floating rate products because the floating part of your cash flow is going up. Then they stabilize and the most likely scenario at that time is for REITs to be lowered, which is when you want to get out, but everyone wants to get out. Really tricky.

Basically a lower yield ETF because dividends that are paid on the preferred shares inside this ETF are lower than what you would get on a standard preferred in the market. But this dividend will rise and fall based on the rate of interest. If you think interest rates are likely to be higher a year or 2 from now, you should have a portion of your portfolio into a product that will give you a great deal of stability and the rate of return you get in terms of the yield will float pretty tightly based on the current rate of interest rates.