Tag: ETF Investing

ETFs Paying 8% Plus Dividend Yields

Posted on by Matt Thalman

There are currently more than a handful Exchange Traded Funds that are paying more than an 8% dividend yield. And yes, you are reading that correctly, more than an 8% dividend yield. There are at least four ETF’s currently paying dividend yields above 8%, while a few others are paying yields even higher.

Furthermore, these ETF’s are investing what is surprisingly a wide range of different investments, meaning even if you’re not a fan of REITS or MLP’s, there is still may be an ETF, that’s paying a healthy yield, out there waiting for you. So, let’s take a look at a few of the different options.

First, we have what most would expect out of a high dividend-yielding ETF, an MLP ETF. The VanEck Vectors High Income MLP ETF (YMLP) is currently yielding 8.18% and has an expense ratio of just 0.82%. The fund has 18 holdings, all of which are MLP’s structured as C-corporations. Also, the weighted average market cap is only $1.36 billion, and the funds top nine holdings all fall in line at 7% to just over 8% fund weighting. Year to date the fund is up 18%, but only 2% over the last month and 3.85% over the previous year.

Another typical high dividend-paying investment is a REIT or Real-Estate-Investment-Trust. And you can imagine when one ETF owns 27 different REIT’s, the dividend gets a little juiced. One such ETF is the VanEck Vectors Mortgage REIT Income ETF (MORT) which has a yield of 7.4% but has an expense ratio of just 0.41%. MORT has 27 holdings with a weighted average market cap of $5.13 billion and has a year-to-date performance of 10.93% while being up just 1.55% over the last month and 11.61% over the last 12 months. MORT invests in mortgage REIT’s which are REIT’s that own mortgages or mortgage back securities. The risk with these investments is that we see outsized mortgage loan default rates, such as what we saw during the last recession. Continue reading "ETFs Paying 8% Plus Dividend Yields" →

How Well Has Your Portfolio Done Year-to-Date

Posted on by Matt Thalman

The first six months of 2019 have been odd, but there is never a better time than now to look at where your money is and how it has performed as we pass over the half-way point of the year.

The year started with the markets rallying back after a disastrous end of 2018, then the trade wars heated up, the economy has begun showing signs of weakness, the Federal Reserve is holding off on interest rate increases and even considering rate cuts, but the markets continue to set new record highs.

If you have been heavily invested in certain sectors you have had a losing 2019, maybe a mediocre year or a great year. On July 1st, the SPDR S&P 500 ETF Trust (SPY) was up 17.42% year-to-date. All of the major indexes and their corresponding Exchange Traded Funds have performed well during the first half of the year. The SPDR Dow Jones Industrial Average ETF Trust (DIA) is up 15% year-to-date, while the Fidelity NASDAQ Composite Tracking Stock (ONEQ) is up 19.92% year-to-date. Even the broader indexes and their ETF’s such as the iShares Russell 1000 ETF (IWB) or the Vanguard Russell 3000 ETF (VTHR) are up 17.53% and 17.47% as of the morning of July 1st.

While the indexes all performed better than average years, if you were more industry-focused then as I said before, it depended on what industry you wherein during the first half of the year on whether or not you kept up with the market. The worst performing ETF during the first half of the year, outside of leveraged or any specialty products focusing on futures, was the Breakwave Dry Bulk Shipping ETF (BDRY) which has lost 29.22% since the start of 2019. The best performing ETF following the same guidelines was the Invesco Solar ETF (TAN), which is up 47.22% in 2019. Continue reading "How Well Has Your Portfolio Done Year-to-Date" →

ETFs Will End The Use Of Mutual Funds

Posted on by Matt Thalman

When Jack Bogle started the Vanguard Index Fund, he essentially changed the investment management game forever. He found a way to reduce the fee’s they charged investors, which in turn, brought Vanguard more investment money than they could have ever imagined.

If the move to lower investment fees was the first landed punch in the fight against mutual funds, the rise of the Exchange Traded Fund is the nuclear bomb in the fight against mutual funds. And well to most market participants, the reason is clear, ETFs are way cheaper and easier for all parties involved.

But, why do lower fees matter? Yes, and the math, while perhaps not simple is straight forward. The idea is that if you invest the same amount each year, we will say $10,000, and in one scenario you pay 0.1% in fee’s and commissions and another you pay 1.5% in fees and commissions. Over 30 or 40 years of investing, the difference of 0.1% and 1.5% will add up because of compounding interest. How much of a difference, well that all depends on your annual return rate, how long you stay invested and how much you are investing, but it could add up to not thousands of dollars, or even hundreds of thousands of dollars, but millions of dollars.

Some quick back of the napkin math looks like this, just to prove my point. A 0.1% fee on $10,000 during one year is just $10. Now a 1.5% fee on $10,000 during one year is $150. Let’s say your account never grows higher than $10,000 over 10 years, (I know very unrealistic, but follow along.) If your fee’s where 0.1% you would pay $100 in fees throughout those 10 years, ($10 a year time 10 years). Now let’s say your fees where 1.5% on your $10,000 for 10 years, (and again it never changed from $10,000) you would pay $1,500 in fees over the 10 years. $100 in fees or $1,500 in fee’s, which would you rather pay? And again, that’s just on a $10,000 investment, imagine if you have $100,000, $500,000, $1 million or more invested. Continue reading "ETFs Will End The Use Of Mutual Funds" →

How To Own Tesla While Reducing Your Overall Risk

Posted on by Matt Thalman

Shares of electric car maker Tesla Inc. (TSLA) are down nearly 50% since December of 2018. That is quite a fall and one that attracts the attention of investors looking to buy a stock after it has shed a large amount of its value in the hopes that the stock price will rebound in the future.

We have seen Tesla’s stock crash before and bounce back even higher. This gives hopes that the company can turn things around and the stock will once again see the $300 handle. Regardless though of what the stock has done in the past, anyone considering investing in Tesla today should be cautious and try to limit their risk as much as possible.

One way of doing this is by simply buying an Exchange Traded Fund, which has a position in Tesla. That way if the stock continues to crash and eventually burns, your investment doesn’t take as much of a hit as if it would if you directly purchase shares of Tesla. On the flip side, if Elon Musk stabilizes the company and investors begin to believe his story, causing Tesla to climb higher, you reap the rewards, and the ETF will also move higher. While the move higher in an ETF may not be as substantial, it would still increase in value if it held a large portion of the auto-maker.

With that in mind, let us take a look at a few different ETFs that hold varying sizes of Tesla in their portfolio’s.

The first ETF is the ARK Innovation ETF (ARKK), which has Tesla as its top holding. Tesla represents 9.96% of the fund’s assets. The fund has 38 different positions, which are companies that focus on disruptive and innovative firms. Despite Tesla’s poor recent performance, the fund is still up 11.64% and down just a half of a percent over the last 12 months. ARKK would see a massive move upwards if Tesla regained the value it has lost, but due to its exposure to the electric car company, if Tesla does continue to decline, ARKK will certainly take a substantial hit. Continue reading "How To Own Tesla While Reducing Your Overall Risk" →

Socially Responsible ETFs May Focus On More Than You Thought

Posted on by Matt Thalman

With what seems like a never-ending flow of new Exchange Traded Fund options for investors to dump money into, one of the more popular, besides indexing, themes are the ‘socially responsible’ exchange traded funds. These funds focus on companies which are seen to be socially responsible. That could and often does mean many things, but for the most part, it represents companies which rate high on environmental, social, and corporate governance scales.

Firm meeting the environmental, social, and governance (ESG) criteria are also believed to have higher rates of return for investors because these companies are less likely to deal with government-imposed fines or just plain old bad publicity. But socially responsible ETF investing just doesn’t end with the ESG firms; it often excludes all companies that fall into the ‘sin stock’ categories. These would include, alcohol, tobacco, gambling, adult entertainment, weapons, and obviously now the marijuana companies. One ETF, which we will get to in just a moment even goes as far as focusing on companies which employ women in high-level leadership positions.

So, before you decide that socially responsible is just for ‘tree huggers’ and isn’t for you, take a look at a few of the ETFs I have highlighted below, and maybe one of them will strike a chord with you.

The first ETF on my list is the iShares MSCI KLD 400 Social ETF (DSI) which is one of the oldest ESG ETFs with an inception date of November 4th, 2006. Due to its long history, it is also one of the largest ESG funds with $1.4 billion in assets under management. However, DSI is in the middle of the range in terms of costs, as the fund carries an expense ratio of 0.25%. DSI tracks a market-cap-weighted index of 400 companies which are considered to have the highest positive environmental, social, and governance characteristics by MSCI. With that being said, Facebook (FB) is the second largest holding in the fund and with the companies ‘data’ scandals in its recent past, some would say the fund has too many holdings which don’t fully represent ‘true’ ESG principles. And because the fund is market-cap weighted, its top ten holdings represent 27% of the fund. So, with all that being said, DSI is an ESG fund, but not for the die-hards. So, if you on the fence about ESG investing, this is a good option to consider. Continue reading "Socially Responsible ETFs May Focus On More Than You Thought" →