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6 Quality Dividend ETFs For Safety And Income

Though U.S. stocks logged in the first weekly gains in a month after a tumultuous ride buoyed up by an incredible rebound in oil price and hopes of additional stimulus in Europe and Japan, a long list of worries kept the stock market returns at risk. This is especially true given the weak international fundamentals, especially in China and its global repercussions that could put a pause on the slowly recovering U.S. economy. Additionally, bleak oil demand/supply trends, weak Q4 corporate earnings, and uncertain timing of the next rate hike are making investors cautious. Notably, corporate profits seem to be in recession with fourth-quarter earnings expected to decline 6.6% as per the Zacks Earnings Trends . This would mark the third consecutive quarter of decline in earnings. Accounting for the weekly gain, the major benchmarks were down 6.5% or more from a year-to-date look and are still in the correction territory having lost more than 10% from their 52-week high price. As per BMO Capital, “the S&P 500 is currently on pace to record its worst monthly decline since January 2009 and 11th worst month during the post war era.” This sluggish backdrop has rekindled investors’ faith in products that provide stability and safety in a rocky market. Nothing seems a better strategy than picking quality dividend stocks in this sort of an environment. Why Quality Dividend? Quality dividend stocks offer safety and stability in a choppy stock market as they ensure regular income to investors in the form of dividends. At the same time, they also have the potential for capital appreciation when the market is on an upswing. Investors should note that these stocks are mature companies, which are less volatile to the large swings in the stock prices, and therefore are well protected than others in a tumbling market, which we have seen several times this year. In a nutshell, quality dividend stocks have a long track of profitability, history of raising dividend year over year with prospects of further increases, good liquidity, and some value characteristics. As a result, a basket of quality dividend stocks offer dividend growth opportunities when compared to other products in the space but might not necessarily have the highest yields. These products provide a nice combination of dividend growth and capital appreciation opportunity and are mainly suitable for the risk-averse, long-term investors. For them, we have highlighted some ETFs that could be excellent choices irrespective of the stock market directions. FlexShares Quality Dividend Index ETF (NYSEARCA: QDF ) This fund uses a proprietary model that includes factors like profitability, solid management and reliable cash flow. Then, the firms are selected based on expected dividend payments, resulting in a basket of 185 securities. The product is widely diversified across components with none of the securities holding more than 3.6% of assets. Further, it is well spread out across sectors with financials taking the top spot at 17.5% followed by information technology (16.8%), consumer discretionary (14.3%) and healthcare (11.9%). The fund has amassed $672.4 million in its asset base and trades in a moderate volume of nearly 71,000 shares. It charges 37 bps in fees per year and pays a dividend yield of 3.24% annually. The fund is down 6.2% in the year-to-date time frame. Schwab U.S. Dividend Equity ETF (NYSEARCA: SCHD ) With an AUM of $2.9 billion, this product offers exposure to the 111 high dividend-yielding U.S. companies that have a record of consistent dividend payments supported by fundamental strength based on financial ratios and ample liquidity. This can be easily done by tracking the Dow Jones U.S. Dividend 100 Index. The fund is well spread across single security with none holding more than 4.8% of assets. However, it is slightly tilted toward the consumer staples sector with 23% share while information technology, industrials, healthcare and energy rounded off the top five. The fund trades in solid volume of more than 667,000 shares a day and is one of the low-cost choices in the dividend space, charging 7 bps in fees per year. The ETF has shed about 5.1% so far this year and yields 3.13% in annual dividends. WisdomTree LargeCap Dividend ETF (NYSEARCA: DLN ) This ETF tracks the WisdomTree LargeCap Dividend Index, which is dividend weighted annually to reflect the proportional share of cash dividend that each company is expected to pay in the coming year. The fund has been able to manage assets of $1.6 billion and trades in good volume of 105,000 shares a day on average. Expense ratio came in at 0.28%. Holding 298 stocks in its basket, the product is widely diversified across each component as none of these hold more than 3.5% of assets. Sector-wise, it also has spread-out exposure with none of the sector making up for more than 15.4% share. The fund has an annual dividend yield of 2.96% and has lost 5.5% so far this year. ProShares S&P 500 Dividend Aristocrats ETF (NYSEARCA: NOBL ) This product provides exposure to 51 companies that raised dividend payments annually for at least 25 years by tracking the S&P 500 Dividend Aristocrats. It is widely diversified across various securities as each account for less than 3% share. From a sector look, more than one-fourth of the portfolio is dominated by consumer staples, followed by healthcare (15.2%), industrials (14.9%), consumer discretionary (12.1%), and financials (11.6%). The fund has an impressive level of AUM of $984.1 million and has an annual dividend yield of 2.13%. Expense ratio is 0.35% while average daily volume is good at 177,000 shares. NOBL has lost 5.3% so far this year. WisdomTree U.S. Dividend Growth ETF (NASDAQ: DGRW ) This fund tracks the WisdomTree U.S. Quality Dividend Growth Index and offers diversified exposure to U.S. dividend-paying stocks with both growth and quality characteristics like long-term earnings growth expectations, and three-year historical averages for return on equity and return on assets. It has gathered $594.5 million in its asset base and trades in good volume of nearly 171,000 shares per day. The ETF charges 28 bps in fees per year from investors and holds 296 securities in its basket, with each holding less than 4.3% share. From a sector look, it provides double-digit allocation to consumer discretionary, information technology, industrials, consumer staples, and healthcare. The fund has lost 5.9% in the year-to-date time frame. First Trust NASDAQ Rising Dividend Achievers ETF (NASDAQ: RDVY ) This fund provides exposure to 50 U.S. stocks with a history of rising dividends and that are expected to continue doing so in the future. In addition, it also screens for stocks with rising earnings per share and cash-to-debt ratio greater than 50%. This can be done by tracking the NASDAQ Rising Dividend Achievers Index. All the securities are well spread out with each accounting for less than 2.2% of total assets. However, the product has a certain tilt toward financials with 27.6% share, closely followed by information technology (23.6%). The ETF has accumulated $36.2 million in its asset base and sees a paltry volume of 20,000 shares a day on average. Expense ratio came in at 0.50%. The fund has shed 8.5% so far this year. Original post

3 Best-Ranked Small-Cap Growth Funds

Risky investors who prefer capital appreciation over dividend payouts may consider investing in small-cap growth mutual funds. Growth funds focus on realizing an appreciable amount of capital growth by investing in stocks projected to rise in value over the long term. Meanwhile, small cap funds are good choices for investors seeking diversification across different sectors and companies. Small cap funds generally invest in companies having market cap less than $2 billion. The companies, smaller in size, offer growth potential and their market capitalization may increase subsequently. Less international exposure make small-cap funds less vulnerable to the stronger U.S. dollar. Though small-cap stocks are believed to provide greater returns, they are also expected to be more volatile than large and mid cap companies. Also, growth funds may experience more fluctuations than other fund classes. Below we share with you 3 top-rated, small-cap growth mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. To view the Zacks Rank and past performance of all small-cap growth mutual funds, investors can click here to see the complete list of small-cap growth funds . Fidelity Advisor Small Cap Growth A (MUTF: FCAGX ) invests the lion’s share of its assets in common stocks of small cap growth companies. FCAGX invests in securities issued throughout the globe. FCAGX considers factors including financial strength and economic condition for investing in a company. The Fidelity Advisor Small Cap Growth A fund has a three-year annualized return of 10.3%. FCAGX has an expense ratio of 1.20% as compared to the category average of 1.33%. RidgeWorth Small Cap Growth Stock I (MUTF: SSCTX ) seeks growth of capital over the long run. SSCTX invests a large chunk of its assets in securities of small cap companies that are traded in the U.S. SSCTX invests in companies having market capitalizations within the range of in the Russell 2000 Growth Index. SSCTX may also invest in American Depositary Receipts. The RidgeWorth Small Cap Growth Stock I fund has a three-year annualized return of 4.7%. As of December 2015, SSCTX held 91 issues with 2.87% of its assets invested in Heartland Payment Systems Inc. BlackRock Small Cap Growth Equity Investor A (MUTF: CSGEX ) invests the major portion of its assets in equity securities of domestic companies having small size market capitalization. According to CSGEX advisors, companies with a market cap similar to those included in the Russell 2000 Index are considered small cap firms. CSGEX may also participate in IPO markets. The BlackRock Small Cap Growth Equity Investor A fund has a three-year annualized return of 5.8%. Travis Cooke is the fund manager of CSGEX since 2013. To view the Zacks Rank and past performance of all small-cap growth mutual funds, investors can click here to see the complete list of funds .

How To Beat Goldman Sachs At The Prediction Game

“It’s tough to make predictions…especially about the future” The late Yogi Berra’s quip about predictions reminds us that we humans are a funny lot. In ancient times, the ancient Babylonians predicted the future using animal entrails. Today, millions of people still turn to astrology to get a glimpse of what’s to come. And we do the same when reading the financial media. Yet, for all of our relentless commitment to divining the market’s future by reading this morning’s Wall Street Journal , it’s hard to avoid feeling that financial predictions aren’t any more reliable than those we find in the astrology columns. Goldman Sachs’ Call on Oil Just consider the case of Goldman Sachs’ calls on the oil price over the past 12 months or so. In late 2014, Wall Street’s premier investment bank asserted that “downside risks” in the oil price were gaining momentum and it forecast a decline in the price of oil to $90 a barrel in the first quarter of 2015. Three weeks into 2015, and oil was trading below $50, confounding Goldman and nearly every other analyst on Wall Street. Fast forward to December 2015, and Goldman is standing by its latest prediction of a $20 per barrel bottom. To give Goldman its due, it was actually more bearish than its peers, lowering its forecast before other investment banks did. But Goldman has revised its predictions so many times that at this point the only thing certain is that Goldman’s predictions will change – rendering them essentially useless. Here’s what’s surprising. Although Goldman’s analysis moves the markets, no one ever calls Goldman Sachs on its bungled predictions. And it is highly unlikely that any Goldman Sachs oil analyst has ever been fired for making predictions about the oil price that have been wildly off the mark. Contrast that with the fate of any surgeon or airline pilot – all of whom would have been sued or put out of a job for showing similar levels of incompetence. The Achilles Heel of Wall Street’s Complex Models Most of us know deep down that astrological predictions are bunk. And we also realize that what Sam Goldwyn said about Hollywood also applies to Wall Street: “Nobody knows anything.” Yet, we still cling to the irrational hope that a sleep-deprived 26-year-old Goldman Sachs analyst, armed with her elaborate spreadsheet models, can tell us something about the future of oil prices. We are still wowed by a combination of the Goldman imprimatur and the apparent complexity of the firm’s financial modeling and its access to information. One of the myths of Wall Street high finance is that the more variables a financial model accounts for, the more accurate its predictions. Truth be told, any financial analyst worth his salt can construct a model that generates accurate predictions based on past data. But test the model on a different set of data and the predictive ability of the most elaborate model simply evaporates. Complex models are rarely robust. Goldman Sachs’ model to predict the oil price is no different. That’s why the “out of sample” data make Goldman Sachs’ oil price predictions essentially worthless. ‘Fast and Frugal’ Decision Making Prevails As psychologist Gerd Gigerenzer has argued, “fast and frugal decision making” trumps complicated predictive modeling almost every time. Goldman’s elaborate models for predicting the future are likely to be more wrong, more often, simply because they are so complicated. The more complicated the model, the larger the likely error. Gigerenzer cites an example from baseball. An outfielder doesn’t do calculus in his head when he estimates where to run to catch a fly ball. Yet the outfielder’s “fast and frugal decision making,” focusing on the one thing that really matters – that is, keeping the angle of the ball in relation to his line of sight constant – beats complicated models of optimization every time. That’s why simple Wall Street aphorisms such as “cut your losses and let your profits run” work better than overly complex statistical models based on normal distribution curves. In the outfield, you’d expect the Goldman Sachs analyst would try to do the calculus and end up dropping the ball. Of course, in “real life” they really wouldn’t. In fact, even Nobel Prize-winning economists don’t invest according to their own models. Gigerenzer recounts how Harry Markowitz, the economist who shared the Nobel Prize in economics in 1990 for developing the core insights of Modern Portfolio Theory, never used his own theory when investing his retirement funds. Instead, he used the “fast and frugal” heuristic (“rule of thumb”) to guide his investment decisions. Ironically, he actually made more money than he would have if he had stuck to his own Nobel Prize-winning theory. Manage Your Risks Instead With global financial markets off to their worst start of the year in history, clients have inundated me with questions about my views on the direction of global stock markets. My advice? Heed Vanguard founder Jack Bogle’s advice: “Don’t do something, just stand there!” Dozens of studies have shown that trying to time the market is a fool’s game. Miss out on just the 10 best days in the market, and your long-term returns in the S&P will halve. And those 10 days happen to come right after the worst 10 days, making trying to time the market that much more difficult. That picture changes only if you are a short-term trader. In that case, your focus should be on managing your risks. Prediction – whether complex or “fast and frugal” – matters little in investing, unless you have a plan to manage your downside risks. A “fast and frugal” plan to cut your losses, say, at 20% in all your investments in 2008 would have trumped the hundreds of gallons of virtual ink spilled on analyzing the causes and consequences of the global market meltdown. Chances are, that rule of thumb won’t be perfect. But as the economist John Maynard Keynes observed: “It is better to be approximately right than exactly wrong.” And the one thing that you can say with certainty about Wall Street’s complex models is: that they will be “exactly wrong.”