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Inside PowerShares’ New Multi-Asset ETF

The recent market upheaval triggered by global growth worries left investors baffled about which investment to tap. While equities have lost their appeal this year, fixed income securities have gained. In the equities spectrum, dividend stocks beat out other equity securities. Meanwhile, some country ETFs outperformed. With uncertainties likely to be in place in the coming days, investors can choose strategies that can reduce risk in their portfolio. And a multi-asset portfolio does a great job in accomplishing this goal. By investing in multi-asset ETFs, investors do not have to worry about the threats emanating from single-asset class picking. This is why PowerShares has rolled out a multi-asset ETF, PowerShares DWA Tactical Multi-Asset Income Portfolio (NASDAQ: DWIN ), which follows a ‘fund of funds’ approach. DWIN in Focus The new ETF looks to track the Dorsey Wright Multi-Asset Income Index. The index chooses investments from a cluster of income strategies on the basis of parameters like relative strength and current yield. The product holds five ETFs in the basket. The ETF will charge investors 69 basis points a year for this exposure. The Fund and the Index are primed for monthly rebalancing. PowerShares High Yield Equity Dividend Achievers Portfolio (NYSEARCA: PEY ), PowerShares Preferred Portfolio (NYSEARCA: PGX ), PowerShares Build America Bond Portfolio (NYSEARCA: BAB ), PowerShares Emerging Markets Sovereign Debt Portfolio (NYSEARCA: PCY ) and PowerShares Global Short Term High Yield Bond Portfolio (NYSEARCA: PGHY ) constitute the fund at the current level with weights of 20.88%, 20.81%, 20.35%, 18.99% and 18.97%, respectively (read: 4 Multi-Asset ETFs to Lower Portfolio Risk ). How This Fits in a Portfolio? DWIN could be an interesting choice for those seeking a broad income play. The fund offers mixed exposure ranging from equities to bonds to the alternative assets. Multi asset ETFs are funds that invest in a combination of diverse asset classes such as investment grade and high yield bonds, domestic and international markets stocks, preferred stocks, REITs and MLPs. These funds offer great diversification benefits by investing across different asset classes and provide a high level of current income with stability and potential for long-term appreciation. In the present low-yield environment, a look at high-income products seems feasible. By investing in diverse asset classes which have low correlations with conventional asset classes, the fund will likely reduce volatility and offer stability to the portfolio. Moreover, a fund-of-funds approach seems a great strategy in minimizing the portfolio risks. Can it Succeed? There is still a desire for such securities despite a good number of choices already in the space. So, the fund has scope for growth in this field (see all the Zacks ETF Categories here ). Still, the fund could face competition from Arrow Dow Jones Global Yield ETF (NYSEARCA: GYLD ), which has amassed over $89 million in assets. It costs investors 75 bps in annual fees. Among others, the popular multi-asset income ETFs – Guggenheim Multi-Asset Income ETF (NYSEARCA: CVY ), iShares Morningstar Multi-Asset Income ETF (BATS: IYLD ) and SPDR SSgA Income Allocation ETF (NYSEARCA: INKM ) – may also give stiff competition to the newbie. Notably, CVY, IYLD and INKM charge 65 bps, 60 bps and 70 bps in fees, respectively. Since the newly-launched fund charges in line with its peers, only a sizable yield can draw investors’ interest. Original Post

How To Find The Best Style Mutual Funds: Q1’16

Finding the best mutual funds is an increasingly difficult task in a world with so many to choose from. How can you pick with so many choices available? Don’t Trust Mutual Fund Labels There are at least 929 different Large Cap Value mutual funds and at least 6296 mutual funds across twelve styles. Do investors need 524+ choices on average per style? How different can the mutual funds be? Those 929 Large Cap Value mutual funds are very different. With anywhere from eight to 741 holdings, many of these Large Cap Value mutual funds have drastically different portfolios, creating drastically different investment implications. The same is true for the mutual funds in any other style, as each offers a very different mix of good and bad stocks. Large Cap Blend ranks first for stock selection. Small Cap Growth ranks last. Details on the Best & Worst mutual funds in each style are here . A Recipe for Paralysis By Analysis I think the large number of Large Cap Value (or any other) style mutual funds hurts investors more than it helps because too many options can be paralyzing. It is simply not possible for the majority of investors to properly assess the quality of so many mutual funds. Analyzing mutual funds, done with the proper diligence, is far more difficult than analyzing stocks because it means analyzing all the stocks within each mutual fund. As stated above, that can be as many as 741 stocks, and sometimes even more, for one mutual fund. Any investor focused on fulfilling fiduciary duties recognizes that analyzing the holdings of a mutual fund is critical to finding the best mutual fund. Figure 1 shows our top rated mutual fund for each style. Figure 1: The Best Mutual Fund in Each Style Click to enlarge Sources: New Constructs, LLC and company filings The Barrow Value Opportunity Fund (MUTF: BALIX ) ranks first, the Brown Advisory Equity Income Fund (MUTF: BAFDX ) ranks second, and the Wall Street Fund (MUTF: WALLX ) ranks third. The Artisan Mid Cap Value Fund (MUTF: APHQX ) ranks last. How To Avoid “The Danger Within” Why do you need to know the holdings of mutual funds before you buy? You need to be sure you do not buy a fund that might blow up. Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. No matter how cheap, if it holds bad stocks, the mutual fund’s performance will be bad. Don’t just take my word for it, see what Barron’s says on this matter. PERFORMANCE OF FUND’S HOLDINGS = PERFORMANCE OF FUND If Only Investors Could Find Funds Rated by Their Holdings… The Vulcan Value Partners Fund (MUTF: VVPLX ) is the top-rated Large Cap Blend mutual fund and the overall top-rated fund of the 6296 style mutual funds that we cover. The mutual funds in Figure 1 all receive an Attractive-or-better rating. However, with so few assets in some of the funds, it is clear investors haven’t identified these quality funds. Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, style, or theme. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

NOBL: An ETF For Dividend Growth And The Quest For Yield

By Max Chen and Tom Lydon Investors seeking a steady yield-generating exchange traded fund to help diversify their portfolios in a volatile year can look to the ProShares S&P 500 Aristocrats ETF ( NOBL ) for quality stock market exposure and sustainable dividends. “By investing in dividend growth strategies, you not only get high-quality companies that have delivered strong total returns, you also get the potential for attractive yield,” according to ProShares . “If you look at effective yield, you’ll see dividend growth strategies have significantly outperformed the broader market.” NOBL, which has accumulated $1.39 billion in assets under management, shows a 2.03% 12-month yield and a 0.35% expense ratio. The dividend ETF has been outperforming the broader equities market. Year-to-date, NOBL rose 5.5% while the S&P 500 index was only 0.9% higher. Over the past year, NOBL increased 4.3% as the S&P 500 dipped 0.6%. NOBL’s 17.2% tilt toward industrials and 10.4% position in materials helped the ETF capitalize on the recent rally in more undervalued sectors of the market. Additionally, the fund holds large positions in more conservative or defensive sectors, including 12.9% in health care and 25.5% in consumer staples. The recent selling pressure in the equities market has also made dividend stock plays more attractive , especially as the Federal Reserve projects only two interest rate hikes this year, compared to previous expectations for four rate hikes. As the S&P 500 index experiences its worst start to a new year since 2009, yield spread between the benchmark and 10-year Treasuries widened to their largest spread in a year. The difference between U.S. equity dividend yields and government bonds can be used as a proxy for valuation comparison between the two assets. On average over the past year, the yield on 10-year Treasuries exceeded that of the S&P 500 dividends by 7.7 basis points. However, the recent volatility helped push yields on 10-year Treasury notes below 2%. NOBL, which tracks the S&P 500 Dividend Aristocrats Index, targets the cream of the crop, only selecting components that have increased their dividends for at least 25 consecutive years. Consequently, investors are left with a portfolio of high-quality, sustainable dividend payers as opposed to more high-yield focused funds that may contain companies on more precarious financial positions. High-yield equity funds can be enticing to income-seeking investors, but the higher yields come with higher the risks and are often unstable, writes Kevin McDevitt, a senior analyst for Morningstar . Alternatively, McDevitt argues that dividend growth is a more important factor for long-term dividend investors. “Dividend growth plays a big role in determining total income over the life of an investment,” McDevitt said. “As a general guideline, the higher a company’s, and by extension a fund’s, yield, the less quickly it will grow over time. Over the short run, this initial yield matters more than dividend growth. But as the time horizon grows, dividend growth has a greater impact on the overall payout.” ProShares S&P 500 Aristocrats ETF Click to enlarge Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.