A Sampling of Exchange Traded Funds

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A Sampling of Exchange Traded FundsBy D.K. Williams

+The purpose of this presentation is to inform the interested viewer of possibilities to diversify their portfolio through exchange traded funds. Such funds may be purchased through a broker registered with the National Association of Securities Dealers (NASD). Many investors choose to purchase such securities through an online brokerage account, but you may also visit a brick and mortar brokerage house. An ETF is similar to a mutual fund in that it may hold many individual securities. Unlike a mutual fund, it is traded like a common stock. This usually involves paying a brokerage fee to buy and sell an ETF. However, ETFs tend to have slightly lower annual fees than mutual funds.

+Exchange traded funds (ETFs) are identified in the following slides by the ticker symbol in the upper, left corner. The present author encourages anyone thinking of investing in any of these ETFs to enter the ticket symbol in your favorite investing research site and/or discuss with your broker/financial planner. Seriously, the names of these ETFs have been omitted to encourage you to do your homework!

The author confesses a certain bias towards companies that offer dividends. Therefore, most of the stock ETFs to follow pay dividends.

+ETFs are presented under three categories:(1) Equity securities, in other words, common

stocks;(2) Bonds and bond-related securities; and(3) Alternative securities such as real estate,

master limited partnerships, private equity, etc.

For each ETF you will find dividend yield, market price performance (excluding dividends) for up to three time frames, and the net expense ratio (basically an annual fee charged by the ETF manager). Hopefully, you will find this information stimulating in your search for investment opportunities. Disclaimer: Information contained in this presentation is not intended

as investment or legal advice, and is given for informational and educational purposes only. Any financial gain or loss associated with use of this material is strictly the responsibility of the user of this information. The present author may be long (own) any or all of the ETFs mentioned. Information contained in this presentation is believed to be current as of June 22, 2014. The user of this information assumes responsibility for any errors, omissions, or inaccuracies.

+Equity Securities

(Common Stocks)

+DVYInvests in US stocks with a history of increasing dividends.

Distribution Yield

1 year market return



Net expense ratio

2.96% 20.31% 20.44% 7.07% 0.40%

Notes: Distribution yield is the annual dividend rate. Market return reflects annualized changes in stock price not including dividends. Net expense ratio is the annual fee assessed by the ETF company.

+QQQ100 biggest companies on NASDAQ exchange. Over-weighted with tech stocks.Distribution Yield




Net expense ratio

1.44% 26.64% 22.10% 10.41% 0.20%

+PJPA selection of 30 pharmaceutical stocks.

Distribution Yield




Net expense ratio

0.38% 40.26% 33.44% NA 0.63%

+PTHA broader basket of health-care stocks than the aforementioned PJP.

Distribution Yield




Net expense ratio

0.33% 13.67% 20.74% NA 0.65%

+XLPConsumer staples

Distribution Yield




Net expense ratio

2.34% 15.35% 17.53% 9.57% 0.16%

+XLEConsumable fuels such as oil and gas, and related equipment and services.

Distribution Yield




Net expense ratio

1.68% 20.66% 15.05% 14.12% 0.16%

+FDDA selection of European dividend-paying stocks.

Distribution Yield




Net expense ratio

3.51% 32.15% 11.52% NA 0.60%

+VWOStocks from emerging markets (e.g., China, Taiwan, Brazil) If you really have nerves of steel look up FM, an ETF for “frontier markets” such as Kuwait and Nigeria.

Distribution Yield




Net expense ratio

2.77% 4.72% 7.59% NA 0.15%

+Bond and Bond-related ETFs

+BNDAn ETF that invests in corporate bonds and treasury securities.

Distribution Yield




Net expense ratio

2.53% 2.60% 4.72% NA 0.08%

+JNKInvests in so-called “junk bonds.” They pay a higher coupon rate to compensate for greater risk of default.

Distribution Yield




Net expense ratio

5.79% 8.61% 12.66% NA 0.40

+LQDInvests in investment grade corporate bonds.

Distribution Yield




Net expense ratio

3.58% 5.32% 8.72% 5.96% 0.15%

+GNMABuys Government National Mortgage Association mortgage-backed obligations.

Distribution Yield




Net expense ratio

0.88% 1.99% NA NA 0.25%

+TIPAn EFT that is comprised of at least 95% government bonds, primarily treasury inflation protected securities..

Distribution Yield




Net expense ratio

0.98% 0.01% 5.32% 5.04% 0.20%

+SPFFThis ETF is composed of high-yielding preferred stocks in the United States and Canada. Preferred stocks tend to behave more like bonds than common stock in terms of their dividends. In case of bankruptcy, preferred stock holders get paid after bond-holders but before common stock-holders.

Distribution Yield




Net expense ratio

7.00% 7.66% NA NA 0.58%

+CWBInvests in issues of convertible bonds. In theory, these securities might be converted to common stock at some point in time. Something for the ETF manager to take care of.

Distribution Yield




Net expense ratio

3.30% 16.98% 14.57% NA 0.40%

+So-called “Alternative ETFs”

The present author believes some of them should be in most portfolios to provide better diversification than can be obtained though

common stocks and bonds alone.

+VNQAn ETF composed of real estate investment trusts (REITs). This is a broad-based ETF that owns companies holding and sometimes managing commercial and residential real estate, self-storage facilities, and even health-care facilities.

Distribution Yield




Net expense ratio

2.72% 9.90% 22.91% NA 0.10%

+PSPHere’s a way to invest in private equity securities without the high initial cost of buying into an individual firm. This particular ETF invests in private equity securities on a global basis. The net expense ratio is high relative to many other types of ETFs.Distribution Yield




Net expense ratio

13.98% 19.51% 18.74% NA 2.19%

+AMLPInvests in Master Limited Partnerships (MLPs) involved primarily in the transportation of fuels, specifically pipelines.

Distribution Yield




Net expense ratio

6.03% 11.55% NA NA 0.85%

+DBAPurchases commodity futures contracts on agricultural products such as sugar, live cattle, wheat, corn, hogs, soybeans, coffee, and cocoa.

Distribution Yield




Net expense ratio

0.00% 8.71% -0.13% NA 0.85%

+GLDAn ETF that Auric Goldfinger would love; it holds gold bullion. A play on the price of gold but might also serve as a hedge against political uncertainty.

Distribution Yield




Net expense ratio

0.00% -10.07% 4.59% NA 0.40%

+HVPWThis ETF reflects the performance of a portfolio of exchange-traded put options on highly volatile U.S. stocks.

Distribution Yield




Net expense ratio

9.45% 2.88% NA NA 0.95

+CSMThis ETF may take long or short positions on any of the 500 largest U.S. companies by market capitalization.

Distribution Yield




Net expense ratio

1.32% 23.42% NA NA 0.45%

+Summary

The proceeding slides presented many ideas to stimulate investment thinking. Please keep in mind that good portfolio construction involves many factors such as: a person’s age and resources, tolerance for risk, diversification, tax policy, the macro economic environment, and research.

Many “experts” pay little attention to “alternative” investments and tend to focus almost exclusively on stocks and bonds. In general, as a person gets older they recommend owning a lower proportion of stocks and a greater proportion of bonds. However, in the current interest rate environment, a person whose portfolio is overweight bond mutual funds (or bond ETFs) would be crushed by a sharp increase in interest rates as bond prices fall when interest rates rise. One could make an argument here for buying individual bonds and holding them to maturity to avoid loss of principal.

+Questions and Comments

The author welcomes questions and comments. Feel free to contact him at the email address below.

[email protected]

mailto:[email protected]

Economy & Finance

A Sampling of Exchange Traded Funds