The NASDAQ (NASDAQ:COMP) has hit a number of new all-time highs in 2017. This has many analysts and investors wondering if the market and especially technology stocks are getting over-heated.
The Bulls will tell you that we are entering a new time of economic expansion and that technology is leading us forward. They say the higher than normal P/E ratios are due to the massive growth opportunities these companies still have moving forward.
The Bears, which I spoke about a few weeks ago, disagree and believe we are heading toward the next dot.com bubble. They say the 'Bulls' growth expectations are already built into tech stocks so much so that these companies are priced to perfection, which we all know is unlikely to happen.
SPDR S&P 500 ETF (SPY), Schwab U.S Broad Market ETF (SCHB), State Street Corporation (STT), Invesco (IVZ), Wisdom Tree (WETF), BlackRock (BLK), ETF investing, ETF's, benefits of etfs,
But first, maybe you are wondering what an ETF operator does and how do they make money?
Plan and simply an ETF operator sponsors and runs an exchange traded fund. ETF's are either managed or unmanaged. Managed would mean someone is actually deciding which investments to hold in the ETF in order to gain the highest return. Unmanaged ETF's are ones that simply track a corresponding index; such is the case with the SPDR S&P 500 ETF (SPY) which tracks S&P 500.
An ETF operator makes its money by charging a fee to manage the ETF. These fees are usually displayed as a percentage. These fees or the annual expense ratio, as it is often called, can range in amounts from as little as 0.04% which is the case with the Schwab U.S Broad Market ETF (SCHB), up to more than 3% with some of the exotic funds. Managed funds always carry a higher expense ratio as they require daily monitoring by the managers. Whereas with unmanaged funds a manager only has to make changes when the index the fund tracks changes, which is not usually very often. Think of it this way, managed means constant attention baby-sitting while unmanaged means no to little baby-sitting and the more baby-sitting, the higher the price.
With an explosion of ETF's over the past few years, finding quality, goal specific, industry or type focused funds can be very challenging. With dividend investing growing in popularity, today we will be looking at 3 ETF's that focus on dividends. Two will be more focused on investors looking for high yields while the third will be more traditional and offer the dividend investor safety, security and a solid yield.
So, let's get right to it.
The first pick is the Arrow Dow Jones Global Yield ETF (GYLD). The GYLD is a high yielding ETF, currently boosting a 7.67% dividend yield, which focuses on finding and investing in the 150 highest yielding investable securities in the world. The ETF holds both stocks and bonds and that ratio currently sits at a 60/40 split. The ETF's top 3 holdings include Whiting USA Trust II (WHZ), CVR Partners, LP (UAN) and Alon USA Partners, LP (ALDW), of which two are oil and gas partnerships. Continue reading "Top 3 Dividend ETF's Every Dividend Investor Should Consider Owning"→
For good and bad, Wall Street is constantly finding new ways for investors to attempt to grow their money. But, with all these products available for investors to choose from and a massive amount of information being presented to the average investor, it is easy to understand why so many investors still ignore ETFs and stick with mutual funds.
In most cases the average investor does not have a choice between a mutual fund and ETFs when it comes to their 401(K) plans through their employer. But for those investors who decide they want to put more money to work than just their 401(K) contributions, plowing more money into mutual funds is a bad idea for three reasons: truly knowing what your buying, performance, and cost.
Knowing What You Actually Own
Walk into any retail store in the US and pick up a any product; find the tag if it's a piece of clothing, the label if it's a drug or grocery item, or even the new Christmas toy you purchased, and you can find out exactly what was used to make that product. Depending on what the product is, there are different laws that have been put in place to protect the consumer which require the manufacturer to inform the customer of exactly what they are getting at all times.
Flip to the world of finance, unfortunately knowing what you are buying at all times is not always the case. While mutual funds are required to disclose their holdings to the public, these disclosures don't typically happen more than on a quarterly or semiannual basis. So what that means is that although you think you have purchased a large-cap growth mutual fund and that the manager must have at least 90% of the fund's assets in large-cap growth stocks, you essentially have no way of finding out if that's really were your money is invested. All the mutual fund manager needs to do is sell whatever doesn't meet the large-cap growth requirement the day before the fund's disclosure statement is put together and to investors it looks like the manager is doing exactly what he is supposed to be doing.