A potential error that large bond investors could commit before the Federal Reserve reduces interest rates.

Despite the Federal Reserve's plan to reduce interest rates in 2021, investors may prefer to maintain or increase their investments in fixed income.

Joanna Gallegos, co-founder and COO of BondBloxx, advised against rushing back into equities without considering fixed income opportunities, as stated on CNBC's "ETF Edge" this week.

Despite dropping below 5% in late 2023, the benchmark yield has recently accelerated. As of Thursday's market close, the yield was close to 4.31%. On Wednesday, it reached a high for the year at 4.429%.

Gallegos recommends investors manage interest rate fluctuations by investing in exchange-traded funds that specialize in intermediate-term bonds.

Going into the intermediate space, whether it's in credit or within Treasurys, involves some risk but can result in a total return tail wind when rates decrease.

Tony Rochte of Morgan Stanley Investment Management suggests a similar medium-term strategy using vehicles such as the Eaton Vance Total Return Bond ETF (EVTR) under his firm's management.

"The firm's global head of ETFs stated in an interview that the portfolio is currently a 6-year duration with a 6.6% yield, and it is considered a best ideas portfolio."

Rochte suggested municipal bond funds, such as the Eaton Vance Short Duration Municipal Income ETF (EVSM), as income-generating opportunities.

"Last Monday, we converted a municipal bond mutual fund into an ETF on the NYSE, symbol EVSM, which is a municipal bond. The yield is 3 1/2%, almost a 6% taxable equivalent yield. These rates are very attractive in the current environment."