Tag Archives: nasdaq

2 Rising ETFs With 5% Yield

With global growth issues flexing muscles and corporate earnings falling flat, risk-on sentiments are finding it tough to sail smooth this year. Safe harbors like Treasury bonds are in demand, resulting in a decline in yields. As of May 16, 2016, yields on the 10-year U.S. Treasury note were 1.75%. As a matter of fact, the 10-year U.S. Treasury note did not see 2% or more yield after January 28, 2016. A dovish Fed, which lowered its number of rate hike estimates for 2016 from four to two in its March meeting citing global growth worries and moderation in U.S. growth, was also behind the decline in bond yields. Even Goldman Sachs cut its forecast for 10-year U.S. Treasury bond yields over the coming few years. Goldman Sachs now expects its year-end 10-year yield to be 2.4%, down from the 2.75% it projected in the first quarter. It does not expect the 10-year yield to rise above 3% to close out a year before 2018 (read: Time for Investment Grade Corporate Bond ETFs? ). Needless to say, this is a difficult situation for income investors that forced many to try out almost every high-yielding investing option. But higher yields sometimes come with higher risks. So, it is better to bet on investing areas that are better positioned from the return perspective and also offer a solid yield. One such option is preferred ETF. What is a Preferred Stock? A preferred stock is a hybrid security that has characteristics of both debt and equity. These do not have voting rights but a higher claim on assets than common stock ( Complete Guide to Preferred Stock ETF Investing ). That means that dividends to preferred stock holders must be paid before any dividend is paid to the common stock holders. And in the event of bankruptcy, preferred stock holders’ claims are senior to common stockholders’ claims, but junior to the claims of bondholders. The preferred stocks pay stockholders a fixed, agreed-upon dividend at regular intervals, like bonds. Most preferred dividends have the same tax advantage that the common stock dividends currently have. However, while the companies have the obligation to pay interest on the bonds that they issue, the dividend on a preferred stock can be suspended or deferred by the vote of the board. Preferred stocks generally have a low correlation with other income generating segments of the market like REITs, MLPs, corporate bonds and TIPs. However, unlike bond prices, these are also sensitive to downward changes in interest rates. If interest rates fall, issuers have the option to call shares and reissue them at lower rates. Investors should note that preferred ETFs have hit 52-week highs. Below we highlight two such options that are rising and also offer more than 5% yield. PowerShares Preferred Portfolio ETF (NYSEARCA: PGX ) The fund holds a portfolio of 237 preferred stocks in its basket, tracking the BofA Merrill Lynch Core Plus Fixed Rate Preferred Securities Index. It charges 50 bps in fees. Financials (85.1%) dominates this fund followed by utilities (6.5%). With the 30-day SEC payout yield of 5.72%, the fund is a solid income destination. The fund advanced 6.3% in the last three months (as of May 16, 2016). SPDR Wells Fargo Preferred Stock ETF (NYSEARCA: PSK ) The 151-securities portfolio invests 79% of the basket in the financial sector. The 30-Day SEC yield is 5.18% (as of May 13, 2016). The fund charges 45 bps in fees and added 5.7% in the last three months (as of May 16, 2016). Link to the original post on Zacks.com

How To Invest In A Flat Stock Market

Tim Maverick, Senior Correspondent As The Wall Street Journal recently pointed out, both the S&P 500 Index and the Dow Industrial Average have not hit a new high in over a year. In fact, the stock market averages are little changed from the levels of late 2014 – not a shock, considering U.S. companies have been in an earnings recession for almost the same length of time. Investors are beginning to lose their patience with this stagnant stock market. Through the week of May 11, 2016, they’ve pulled $67.7 billion from U.S. equity mutual funds and exchange-traded funds (ETFs) in 2016, alone. For a market observer, like myself, this stuck-in-the-mud market status doesn’t come as a surprise. Just look at the history behind these dangerous stagnant periods. Muddy Market History According to the Bespoke Investment Group, this will mark the 21st time, since 1930, that the market has gone a year without making a new high. This is one of those dirty little secrets kept under lock and key by brokers and CNBC, alike. The stock market, on occasion, has gone through long periods without making any headway: Thanks to the Great Depression, the market levels of 1929 were not seen again until 1954. The 1970s were no picnic, either, thanks to the oil shock and rampant inflation. In January 1966, the Dow hit the 990 mark, a level that it did not re-visit until 1982. More recently, the Nasdaq hit a closing record of 5048.62 on March 10, 2000. It took another 15 years, in April 2015, for the market to surpass those numbers. While I don’t expect a long-term drought like these earlier periods for the current stock market, history proves that, in times like these, the S&P 500 Index funds are not a reliable path along which to set your hard-earned money. Can you afford to have your money just lying around for a decade or more, only to come up earning nothing? The only reason these funds’ recent history looks remotely positive is due to the flood of central bank liquidity since the financial crisis has floated big-cap boats. Even a casual examination of global markets shows that the central bank actions are losing their punch. And, despite all the liquidity, big cap stocks have been merely treading water since late 2014. Staying Afloat So what can investors do? It’s crucial to find the right investments – as shelter from the storm of earnings recession and rich valuations well above the 10-year average – that still offer some upside and keep your money working. The best place for earnings continues to be the bond market. An undeniable fact is: Thanks to zany central bank policies, there are, globally, nearly $10 trillion in government bonds that trade with a negative yield. That fact will – despite whatever the Fed may or may not do – keep a firm bid under U.S. Treasuries. With my forecast of a 1% yield on 10-year Treasuries within a year, the iShares 20+Year Treasury Bond ETF (NYSEARCA: TLT ) looks very appealing. Further, with the European Central Bank starting its corporate bond buying binge later this month, the Powershares International Corporate Bond Portfolio ETF (NYSEARCA: PICB ) also looks like a winner. This ETF has more than a 50% exposure to European corporate bonds. It’s also important to note that periods of poor stock market returns tend to coincide with strong performances in gold and silver. As pointed out by my Wall Street Daily colleague, Jonathan Rodriguez: gold seems to have broken out on a technical basis. I would play gold through the VanEck Merk Gold Trust ETF (NYSEARCA: OUNZ ), which allows investors to actually convert their holdings into physical gold, if they wish. Thus, this investment can become tangible and, therefore, even more reliable. However, the best way to play stocks, currently, is to stick with the dividend payers. One ETF to grab dividends globally is the WisdomTree Global Equity Income ETF (NYSEARCA: DEW ), which is up about 3% this year in addition to paying quarterly dividends. U.S. stocks make up roughly 55% of the portfolio, led by well-known names like General Electric Company (NYSE: GE ), Exxon Mobil Corporation (NYSE: XOM ) and Johnson & Johnson (NYSE: JNJ ). The returns from the funds I’ve mentioned project steady gains and I believe they will easily outpace stagnant S&P 500 funds.

What To Look For In A Successful Money Manager Today: Mindsets And Beliefs

We have been discussing for weeks the effects of globalization on all economies, financial markets, companies and money managers. Last week I listened to the speakers at the Sky Bridge Alternatives Conference in Las Vegas talk about the demise of the hedge fund industry. I say: Instead of dwelling on the past, let’s look at what is needed today to be a successful money manager regardless of asset class. In this article I will look at the mindsets and beliefs of a successful money manager. In the next article, I will examine the skill set and track record necessary to successfully manage money. Then in a third article, I will discuss the personal attributes necessary in the character of a successful money manager. In order to be successful, a money manager must have the right mindset and system of beliefs. To be specific, a successful money manager must: Have core beliefs that can be articulated and supported by the facts. You do not want a manager who reacts to every piece of news and trades out of his positions. Look for someone who gathers all the data; understands the inter-relationships between all markets utilizing a systematic approach; reflects and pauses before reacting; considers first the proper asset allocation with risk controls; and finally does in-depth independent research on each investment Think long term. Stop thinking as a trader. You cannot be overly concerned about daily performance, because in fact, it will impact/jeopardize your long-term returns. Market psychology is such that investors like the idea of buying low and selling high but unfortunately act in reverse. It is ironic that hedge funds were so hot after 2008 when risk management and protecting assets were the major emphasis but are so cold now as hedge funds have under-performed in an historic 7-year up market. Think globally regardless of asset class and have a holistic perspective. Linear thinkers who trade rather than invest unfortunately dominate the markets causing excessive volatility and confusion. Have cardinal rules for investing that can be applied to all economic environments, asset classes, regions, industries and companies. Think like a master chess player focusing both three or four moves down the board while contemplating the very next move. Be good for all seasons, which means protecting assets in down markets, performing reasonably well in up markets, therefore outperforming over market cycles. This is the mindset a money manager must have to be successful. He must think globally and long-term. In my next article, I will discuss the skill set of a successful money manager and also offer advice about what the track record of a manager you hire should be. Invest Accordingly!