FLOT — iShares Floating Rate Bond ETF
FLOT holds investment-grade floating rate notes — bonds whose coupon payments reset periodically based on a benchmark rate (typically SOFR). Because the interest rate adjusts regularly, FLOT has extremely low duration risk, making it one of the most rate-insensitive bond ETFs available. When interest rates rise, FLOT's yield increases almost immediately, providing investors a natural inflation and rate-hike hedge.
Top Holdings
Strategy
- →Use as a rate-rising-environment hedge that benefits from higher benchmark rates
- →Hold when the Federal Reserve is in a rate-hiking cycle to capture rising short-term yields
- →Park capital defensively during periods of interest rate uncertainty
- →Combine with fixed-rate bond ETFs for a portfolio that is partially insulated from rate moves
Best For
- ✓Investors specifically concerned about rising interest rates destroying fixed-rate bond values
- ✓Capital preservationists who want investment-grade income with near-zero duration risk
- ✓Tactical allocators who shift to floating rate bonds ahead of Fed rate-hiking cycles
- ✓Conservative investors seeking to earn money-market-plus yields from quality corporate issuers
Key Risks
- ⚠When interest rates fall, FLOT's income decreases — disadvantaged in falling-rate environments
- ⚠Corporate credit risk — floating rate notes are issued by corporations, not the government
- ⚠Lower yield ceiling than fixed-rate bonds in stable rate environments
- ⚠Expense ratio of 0.15% is higher than some comparable fixed-rate alternatives
Similar ETFs
Frequently Asked Questions
What is a floating rate bond?
A floating rate bond has a variable coupon that resets at regular intervals based on a benchmark interest rate (such as SOFR). When rates rise, the coupon increases; when rates fall, it decreases. This virtually eliminates duration risk. This is educational content, not financial advice.
Is FLOT good when rates are rising?
Yes. FLOT's floating rate coupons reset higher as benchmark rates rise, allowing investors to benefit from a rate-hiking environment. This is the opposite of fixed-rate bonds, which fall in price when rates rise. This is educational content, not financial advice.
How does FLOT compare to BKLN?
Both are floating rate vehicles, but FLOT holds investment-grade corporate floating rate notes while BKLN holds leveraged bank loans (often below investment-grade). FLOT has higher credit quality; BKLN offers higher yield. This is educational content, not financial advice.
Does FLOT pay monthly dividends?
Yes, FLOT pays monthly income that adjusts with prevailing short-term interest rates. When rates are high, distributions increase; when rates fall, distributions decrease. This is educational content, not financial advice.
What is the duration of FLOT?
FLOT's effective duration is typically less than 0.2 years because its coupons reset so frequently. This makes it one of the most interest-rate-insensitive bond ETFs available. This is educational content, not financial advice.
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