Fixed-income investors through most of the six years since the financial crisis hit have obsessed about the prospect of rising interest rates and their potential to inflict capital losses on what is supposed to be the safest part of their portfolios.

The world’s central banks have conspired to keep real (after inflation) interest rates close to zero, unless you’re prepared to take on extra credit risk or lock in to longer terms.

Exchange-traded funds (ETFs) are just as valuable to fixed-income investors as they are for equity investors. In either case, the benefits include diversification, reasonable investment management costs and — depending on which product you choose — efficiency.

We asked three ETF experts to identify fixed-income ETFs for investors who are convinced that interest rates will — finally — start to inch back up in 2015. Of course, our experts are not necessarily predicting this.

Until recently, every indication from the U.S. Federal Reserve was that rates should bottom in 2015 or, at worst, 2016. But as we saw with the Bank of Canada’s surprise 25-basis-point cut in January, markets have a way of confounding prognosticators. As the plunging price of oil rocks the market, some even expect another rate drop in March.

Tyler Mordy, director of research and co-CIO at Hahn Investment Stewards, said “the rising rate environment is not our core scenario.” But if Canadian rates were poised to rise, investors would want the lowest-duration product available. In that case, Mordy said, a “floating rate product makes the most sense since, effectively, its duration is shorter than ‘short-duration’ fixed-income ETFs.”

Duration measures a bond’s price sensitivity to changes in interest rates: the bigger the duration the greater the risk or reward from interest-rate moves. Floating-rate funds invest in debt instruments whose coupons fluctuate with interest rates, in contrast to coupons with a fixed rate.

Investors might consider three floating-rate ETFs: iShares Floating Rate Index ETF (XFR/TSX, 0.22% MER, 0.13-year duration); PowerShares 1-3 Year Laddered Floating Rate Note Index ETF (PFL/TSX, 0.2% MER, 0.13-year duration); or the actively managed Horizons Floating Rate Bond ETF (HFR/TSX, 0.4% MER, 0.44-year duration).

However, Mordy cautions, given his firm’s prediction of “lower for longer” Canadian rates, he’d be wary of putting significant money into products with near-zero or negative real yields (net of inflation.)

A higher-yielding alternative for taxable accounts is BMO S&P/TSX Laddered Preferred Share Index ETF (ZPR/TSX, 0.45% MER). Its yield of 4.22% is substantially more than any of the floating-rate or short-duration fixed-income ETFs, although ZPR would be slightly less effective in mitigating an imminent interest-rate hike should it occur. It’s also more vulnerable to capital losses in a bear market for stocks.

Mark Yamada, chief executive of PUR Investing Inc. likes floating-rate and senior-loan products, but offers a caveat.

“When credit markets tighten, reset provisions protect the investor, but the costs are relatively high fees and limited liquidity, he said. Most ETFs in the space are fine for retail investors as long as they are patient and not looking to trade actively.”

Some rely on U.S. products, some barbell high yield and cash equivalents, and some of the Canadian products rely on domestic housing paper that could be uncomfortable for investors concerned about domestic housing, he added.

PUR uses fixed income as a volatility dampener. “Following a 32-year bull market in bonds, our preference is to manage to a lower duration, Mr. Yamada said. Volatility is likely to be higher at the short end of the curve, but “risk/reward is more easily contained under a five-year term.

As a result, simple ladders may be the best solution for retail investors. “Given the apparent strength of North American economies, corporate bonds and one-to-three-year or one-to-five-year ladders should be fine, he said.

ETFs that do the laddering on your behalf include iShares 1-5 Yr Ladder Government Bond Fund (CLF/TSX) or, for those wanting more yield at higher risk, iShares 1-5 Yr Laddered Corporate Bond Index ETF (CBO/TSX).

Justin Bender, portfolio manager at PWL Capital in Toronto, doesn’t use floating-rate ETFs for long-term or tactical purposes, but prefers two low-cost “plain-vanilla” ETFs from Vanguard Canada.

If you’re agnostic about interest rates or don’t believe you can time markets, Bender recommends that his clients use Vanguard Canadian Aggregate Bond ETF (VAB/TSX), with 80% in government and 20% in corporate issues and an average term of 10 years. For those expecting a rate rise sooner than later, he recommends Vanguard Canadian Short-Term Bond Index ETF (VSB/TSX).

Of course, if you are absolutely convinced rates can only go up, and soon, you can park your money in Investment Savings Accounts offered by most discount brokers. These currently yield 1.25%, dont have fees, offer one-day settlement, and are usually insured up to $100,000 per account by Canada Deposit Insurance Corp. Short-term GICs are also insured by CDIC.

Jonathan Chevreau runs the Financial Independence Hub and can be reached at jonathan@findependenceday.com