New Junk Bond ETFs
Wednesday February 9, 2011
Today we have 4 new target-date junk bond ETFs from Guggenheim (formerly known as Claymore)...
* BSJC - The Guggenheim Bulletshares 2012 High Yield Corporate Bond ETF
* BSJD - The Guggenheim Bulletshares 2013 High Yield Corporate Bond ETF
* BSJE - The Guggenheim Bulletshares 2014 High Yield Corporate Bond ETF
* BSJF - The Guggenheim Bulletshares 2015 High Yield Corporate Bond ETF
The company had seven similar ETFs launch last June, but they were not high yield corporate bond ETFs like these. And Guggenheim has plans for some more of these target-date ETFs, that extend beyond these years.
There's no doubt junk bond ETFs are popular as of late, but investors must be careful in the analysis and research. And as of today these bond ETFs are trading around $25-$26.
Disclosure NONE
Showing posts with label Bonds. Show all posts
Showing posts with label Bonds. Show all posts
Thursday, February 17, 2011
Sunday, January 30, 2011
Bond ETFs Are Good…If You Understand Them
If you’ve eyed the current 4.57% yield on the 30-year Treasury bond, you might be tempted to buy. But hold on: chasing yields in your exchange traded funds (ETFs) can hurt you if you’re not careful.
In hopes of getting halfway decent yields, millions of investors have gone far out on the curve. However, bonds and bond ETFs aren’t insured by the Federal Deposit Insurance Corporation (FDIC), so you’re at risk of losing principal when the Federal Reserve raises rates.
Short-term bond ETFs don’t have the most appealing yields – 3-month bonds are 0.12%; 3-year bonds are 1% – but they will be less impacted when rates jump.
Constance Gustke at Bankrate drilled down into a few of the pros and cons when it comes to bond ETFs:
Disclosure none
In hopes of getting halfway decent yields, millions of investors have gone far out on the curve. However, bonds and bond ETFs aren’t insured by the Federal Deposit Insurance Corporation (FDIC), so you’re at risk of losing principal when the Federal Reserve raises rates.
Short-term bond ETFs don’t have the most appealing yields – 3-month bonds are 0.12%; 3-year bonds are 1% – but they will be less impacted when rates jump.
Constance Gustke at Bankrate drilled down into a few of the pros and cons when it comes to bond ETFs:
- Pro: They’re liquid – you can buy and sell them anytime markets are open.
- Pro: There are so many options – any type of bond is now available in ETF form, and there’s about to be more soon: BulletShares is launching a suite of BulletShares High Yield Corporate Bond ETFs on Thursday.
- Con: You can lose money. Bonds are considered “safe” relative to other investments, but that doesn’t mean they won’t hurt you.
- Con: There’s risk. It ranges from safe (Treasuries) to super risky (junk bonds).
Disclosure none
Saturday, November 20, 2010
ETFs here there everywhere VTI, VFW, SPy, DOW, VEA
THE BOOM IN EXCHANGE-TRADED FUNDS IS reshaping the investment landscape by challenging traditional mutual funds and giving investors, large and small, the opportunity to get exposure to virtually every major market and asset class in the world—and many minor ones as well.
ETFs are passive mutual funds and trusts that trade like stocks on major exchanges; they can be bought or sold anytime during the trading day. They held a record $940 billion of assets in the U.S. on Oct. 31, up from $794 billion at year-end 2009, and are on track to hit $1 trillion around the end of 2010.
Net inflows totaled $89 billion in the first 10 months of the year, as investors poured money into ETFs focused on developing-market stocks, bonds and precious metals. Exchange-traded funds are gaining market share at the expense of traditional mutual funds, which (excluding money-market funds) hold about $8 trillion of assets.
The benefits of exchange-traded funds include low fees, relative to mutual funds, transparency of investments and tax efficiency because of low portfolio turnover. These funds provide exposure to specific indexes, like the Standard & Poor's 500 or Russell 2000, as well as such investments as gold, natural gas, junk bonds, inflation-protected Treasuries and master limited partnerships. "A lot of investors are realizing the benefits of diversification, and ETFs allow broad diversification at low cost," says Gus Sauter, chief investment officer at Vanguard. It's understandable that investors favor broader portfolios because a U.S-focused equity strategy hasn't done well in the past 10 years, in which the S&P 500 has essentially been flat. As global economic power shifts away from developed markets, investors want exposure to rising countries like China, India and Brazil.
Active traders are heavily involved with exchange-traded funds. Many day traders now play ETFs, including volatile ones that move by double and triple the daily change in their underlying indexes. Popular day-trading vehicles include the Direxion Daily Financial Bull 3x Shares (FAS) and Direxion Daily Financial Bear 3x Shares (FAZ) that offer triple leverage and triple inverse leverage to the financial component of the Russell 1000 index.
The ETF business is highly concentrated, with the 10 largest funds—out of a universe of about 1,000—accounting for 40% of all assets and three just issuers, BlackRock's (BLK) iShares, State Street Global Advisors and Vanguard, controlling 82% of industry assets. Trading in ETFs averages $62 billion a day and accounts for about 25% of the volume on U.S. exchanges.
ETFS ARE A GREAT democratizing force. With a click of a mouse, individuals can get access to stocks in virtually every corner of the world and to assets like commodities that can be cumbersome to buy and largely have been limited to institutions.
Try purchasing 100,000 ounces of silver and then finding a safe place to store it. But it's relatively easy to purchase 100,000 shares of the iShares Silver Trust (SLV, each of whose shares equals one ounce of the metal), which has attracted $9 billion since its introduction in 2006. The largest commodity ETF, the SPDR Gold Trust (GLD), now holds $60 billion of the metal in London vaults. Its popularity has played a role in gold's 25% rise this year, to $1,365 an ounce.
A Booming Sector
More than 1,000 exchange-traded funds exist, covering everything from emerging-market stocks to energy to U.S. blue chips and Treasury bonds. Through October, ETFs pulled in a net $89 billion in assets this year.
[Roundup chart]
Each GLD share, now at $134, equals 1/10th of an ounce of gold, minus a management fee of 0.40% a year. That modest fee has been well worth paying, given the doubling in gold's price since 2008.
Critics say that an influx of ETF money may be contributing to a bubble in some commodities like silver, which has jumped 20%, to $26 an ounce, since Sept. 30.
Investors have been focusing on commodities and other hard assets to play growing demand in the developing world and amid fear that the Federal Reserve's controversial plan to print money via the purchase of $600 billion of U.S. Treasury securities over the coming months will debase the dollar and spur inflation. Cotton has doubled in price since midsummer and a new cotton exchange-traded note, the iPath Dow Jones-UBS Cotton (BAL) is up by a similar amount.
Many real users of commodities contend that investment demand has distorted markets. Gold jewelry demand, for instance, has fallen as the metal's price has shot up. There is a rush to roll out the first physical U.S. copper ETF (see ETF Focus), whose launch could further propel prices of that key industrial metal, already up 20% this year, to $4 a pound. That said, the presence of an ETF on natural gas, U.S. Natural Gas (UNG), hasn't helped gas prices, which are down 35% this year to $3.70 per million BTUs.
The Biggest ETFs
The long rally in gold has made GLD the second-largest ETF.
Assets Recent YTD
Fund/Ticker (bil) Price Total Return*
SPDR S&P 500/SPY $80.6 $121.64 11%
SPDR Gold Trust/GLD 55.8 137.66 28
iShares MSCI Emerg Mkts/EEM 48.0 47.56 16
Vanguard Emerging Markets/VWO 41.0 48.36 19
iShares MSCI EAFE/EFA 36.2 57.92 8
PowerShares QQQ Trust/QQQQ 23.2 53.39 18
iShares S&P 500/IVV 23.1 122.05 11
iShares Barclays TIPS Bond/TIP 20.7 110.92 9
Vanguard Total Stock Market/VTI 15.4 62.47 13
iShares iBoxx $ Invt Grade Corp/LQD 14.5 111.23 12
Assets as of Oct. 31. *Total return as of Nov. 11.
Sources: BlackRock; Bloomberg
Discount and full-service brokers want to capitalize on the ETF boom. Financial advisors who once picked stocks for clients and later selected mutual funds have morphed into asset allocators, and ETFs are an easy and low-cost way to get diversification. The annual expenses on the average one are around 0.50%—one-half to one-third the fees of many mutual funds—and many ETFs charge 0.10% or less.
"There is no better way for individuals to build diversified investment portfolios. Every asset class is available at rock-bottom costs," says Charles Schwab, founder and chairman of Charles Schwab (SCHW).
Schwab has made a major push into ETFs; its clients now hold $100 billion worth of them. The brokerage firm offers managed ETF portfolios, tailored to individual investment goals and risk tolerance, for investors willing to put up a minimum of $100,000. The fee is 0.75% annually for accounts up to $500,000, and lower for levels above that. Overall, the average total yearly fee—including the portion that pays for ETF expenses—is reasonable, at close to 1%.
The Most Traded ETFs
Emerging markets' strength has boosted EEM's popularity.
Assets Average Daily Volume
Fund/Ticker (bil) (bil) ('000 Shr)
SPDR S&P 500/SPY $80.6 $20.5 175,141
iShares Russell 2000/IWM 12.8 3.6 51,638
PowerShares QQQ Trust/QQQQ 23.2 3.5 70,081
iShares MSCI Emerg Markets/EEM 48.0 2.7 57,810
SPDR Gold Trust/GLD 55.8 2.3 17,394
iShares MSCI Brazil Index/EWZ 11.8 1.2 15,923
Financial Select Sector SPDR/XLF 6.0 1.1 77,958
iShares MSCI EAFE Index/EFA 36.2 0.9 15,976
iShares FTSE/Xinhua China 25/FXI 8.5 0.8 18,486
ProShares UltraShort S&P 500/SDS 3.0 0.8 29,627
All data through Oct. 31.
Sources: BlackRock; Bloomberg
Schwab also has rolled out its own ETFs, which have attracted $2 billion in assets and which its customers can trade commission-free. Fidelity also lets clients trade certain ETFs without paying a commission, and TD Ameritrade (AMTD) allows free trades on some 100 ETFs.
One obstacle to growth is unfamiliarity. "If you asked eight out of 10 people, they probably wouldn't know what ETF stands for," says Peter Crawford, a senior vice president at Schwab's client group. Just 17% of Schwab's retail clients now own exchange-traded funds.
AMONG THE KEY differences between mutual funds and ETFS are that mutual funds can only be traded once a day, while exchange-traded funds can be bought or sold whenever exchanges are open. Most mutual funds are actively managed, while virtually all ETFs are passive. Actively managed ETFs probably will remain scarce because government regulators appear loath to approve them. Active managers are reluctant to disclose their holdings daily, partly for competitive reasons. ETFs, in contrast, provide such disclosure.
How do exchange-traded funds add assets? When investors buy shares, the ultimate sellers are designated market makers. When these market makers see their inventories depleted, they create new shares by purchasing the underlying investments and then delivering them to the ETF manager for new shares. Likewise, heavy selling of exchange-traded funds prompts market makers to liquidate the underlying investments, extinguishing shares.
The most actively traded ETF is the original, the SPDR S&P 500 (SPY), which turns 18 years old in January. Others include the iShares Russell 2000 (IWM), which invests in the popular small-cap index; the PowerShares QQQ Trust (QQQQ), which buys stocks in the Apple-heavy Nasdaq 100 index, and the iShares MSCI Emerging Markets (EEM), which holds stocks throughout the developing world.
Who Oversees the Most Assets
Although the industry is expanding, BlackRock (through iShares), State Street and Vanguard manage 82% of the assets in ETFs.
2010
Assets No. Of Inflows
Provider Total (bil) % Total ETFs (bil)
iShares $426.7 45.4% 218 $24.5
State St. Global 213.5 22.7 93 7.3
Vanguard
135.0
14.4 62 32.1
PowerShares
41.7
4.4 117 4.8
ProShares 24.4 2.6 111 4.0
Van Eck Associates 17.3 1.8 29 2.4
Deutsche Bank 11.5 1.2 36 -2.7
Bank of New York 10.8 1.2 1 1.2
WisdomTree 8.9 0.9 44 2.1
Barclays (iPath) 8.3 0.9 38 3.3
All data through Oct. 31. Sources: BlackRock; Bloomberg; National Stock Exchange
Hedge funds use ETFs to bet for or against different sectors in the stock market and as a hedge against their long holdings. Hedge funds, for instance, are believed to account for a high percentage of the heavily shorted SPDR S&P Retail (XRT) and the SPDR KBW Regional Banking ETF (KRE). A hedge fund might short the KRE as a bet against regional bank stocks or to hedge against a long position in bank stocks. Some investors think the emergence of ETFs has made it too easy for big investors to short shares, adding to market volatility.
But some of the largest ETFs aren't heavily traded because they're favored by buy-and-holders. These include several bond ETFs, including the iShares Barclays TIPS Bond Fund (TIP), which invests in inflation-protected Treasuries, and the iShares iBoxx Investment-Grade Corporate Bond (LQD), which holds high-grade corporate bonds.
Vanguard has made the biggest inroads in ETFs, gathering an industry-leading $32 billion in net assets this year, due in part to fees that average just 0.18% annually—a third of the industry average.
THE ISHARES BUSINESS is a great one. It generates operating-profit margins around 40% for BlackRock, which bought it from Barclays for $14 billion last year, when the British bank was reeling from the financial crisis. BlackRock doesn't need highly paid active managers to run the ETFs, and any incremental assets they attract have extremely high margins. The purchase was a shrewd diversification move by BlackRock boss Laurence Fink. A once-obscure bond manager, BlackRock now manages $3.4 trillion in assets and has a $30 billion stock-market value, tops among publicly traded U.S. asset managers.
Vanguard Emerging Markets (VWO) and the iShares MSCI Emerging Markets (EEM) are locked in a battle for supremacy over the hottest current investment group: developing-country stock funds. The iShares ETF is larger at $48 billion, but the Vanguard fund, at $40 billion, is rapidly gaining, thanks to lower fees—0.27% versus 0.72%— and a larger pool of investments that lets Vanguard more closely track the underlying MSCI Emerging Markets index. The Vanguard fund was up 14% through Oct. 31, almost exactly matching the index, while the iShares fund had gained 11.4%.
The most controversial ETFs are those designed to move two and three times the daily change in their underlying indexes by using leverage or financial derivatives. There are 290 leveraged and inverse ETFs, with $40 billion in assets, BlackRock says.
Other Notable ETFs
These all offer an easy way to play specific investments, markets or sectors.
Recent YTD Assets
Fund/Ticker Price Total Return (bil) Comment
iShares Silver Trust/SLV $27.11 62% $9.6 Biggest silver ETF, up 12% in past month
SPDR S&P Dividend/ SDY 51.75 15 4.4 Buys S&P dividend "aristocrats"
SPDR Barclays Capital High Yield Bond/JNK 40.44 13 6.3 Invests in U.S. junk bonds
iShares S&P National AMT-Free Muni/MUB 102.58 4 2.2 Buys U.S. municipal bonds
iPath S&P 500 VIX Short-Term Futures/VXX 45.43 -67 1.7 Offers play on depressed VIX index
Alerian MLP/AMLP 16.02 NA 0.4 Buys master limited partnerships
US Natural Gas Fund/UNG 5.67 -42 2.5 Play on battered gas market
ProShares UltraShort 20+Year Treasury/TBT 36.44 -27 5.4 Anti-Bernanke play on higher rates
Vanguard European/VGK 51.27 7 2.9 Buys European stocks, yields 4%
PowerShares DB Commodity/DBC 26.36 8 4.7 Offers broad commodity exposure
All data as of Nov. 11. NA=Not applicable. Source: Bloomberg
These funds have been criticized because over long periods, they often don't track the underlying indexes. That isn't because of an inherent flaw, but because of the effects of compounding often large daily movements.
As a result, the Financial Industry Regulatory Authority (Finra) said last year that "inverse and leveraged ETFs that reset daily typically are unsuitable for retail investors who plan to hold them for longer than one trading session, particularly in volatile markets." Investors seem to be heeding this advice, because the Direxion 3x financial stock funds have a combined $3 billion in assets, despite enormous daily trading volume averaging 45 million shares for the bullish fund (FAS) and 54 million for the bearish one (FAZ).
To take a simple example, if financial stocks rise 10% one day and fall 10% the next day, the index will drop 1%, to 99, from the original 100 level. A three times leveraged bullish fund would rise to 130 on the first day and then fall to 91 on the second, a 9% drop. The bearish fund would slip to 70 on the first day before rallying to 91 on the second, also producing a 9% decline.
Both the FAS and FAZ have been tough on investors this year and show the pitfalls of an extended investment in leveraged ETFs. The FAS is down just 4%, while the FAZ has plunged 40% and is down 99% since early 2009. All the inverse double-leveraged sector ETFs on the S&P 500 are off sharply this year.
In a cover story at the start of 2009, Barron's argued long-term Treasury yields, then around 2.70%, probably would go higher. That's been the case, with the 30-year T-bond, now yielding 4.25%. The ProShares UltraShort 20-Year Treasury (TBT), however, is down about 10% since then, to 35. It offers the inverse of twice the daily change in the price of long-term Treasuries.
Despite its drawbacks, the TBT is one of the few ways for individuals to bet on higher long-term Treasury rates. The rates already have risen 0.25 percentage point this month and could approach 5% if the Fed's controversial second quantitative easing program boosts inflation and a rout ensues in the bond market. It isn't easy for individuals to short Treasuries. Another alternative is to short the iShares Barclays Capital 20+ Year Treasury Bond ETF (TLT).
Dividend-oriented equity ETFs have been popular this year, including the SPDR S&P Dividend ETF (SDY), which buys S&P's dividend "aristocrats" with a history of 25 years of payout increases, and the iShares DJ Select Dividend Index Fund (DVY), which tracks the Dow Jones dividend index. The SDY's top three holdings are CenturyLink (CTL), Pitney Bowes (PBI) and Cincinnati Financial (CINF), while the DVY's are Lorillard (LO), CenturyLink (CTL) and Chevron (CVX).
It's easy to get low-cost bond exposure via ETFs, including the SPDR Barclays Capital High-Yield Bond (JNK), which now yields 8.5%, and the iShares S&P National AMT-Free Muni (MUB), which yields 3.5%.
Master limited partnerships focused on transporting energy have done very well in the past two years because of investors' hunger for dividends. The Alerian MLP index is up 27% this year, after gaining 62% in 2009. One of the problems with MLPs is that investors get K-1 dividend tax forms—which are more complicated to deal with at tax time than 1099s. The Alerian MLP ETF (AMLP), however, offers 1099s to holders, along with the diversification of 25 MLPs.
The PowerShares DB Commodity (DBC) is a broad commodity ETF with a roughly 50% weighting in energy, while the U.S. Natural Gas fund offers a direct play on natural gas. The UNG is off 45% this year and was down 87% from its 2007 inception through Sept. 30, thanks to weakness in gas prices.
COMMODITY ETFS like the UNG that use futures can be hurt by contango, a term that simply means that future prices are higher than current or spot prices. Contango forces an ETF to roll its spot contracts into higher-priced futures. The UNG has badly trailed gas prices since its creation. That said, it offers a play on the depressed gas market. Prices are down 35% this year, to $3.70 per million BTUs, and are trading at a historically low valuation, relative to oil, now at $86 a barrel. Some investors prefer ETFs that hold physical assets, although that can be tough for some commodities, owing to storage constraints.
Investors can get ETF information from many Websites, including cefconnect.com, xtf.com, etfdb.com and etftrends.com, as well as Morningstar, Yahoo! and Marketwatch.com.
Regardless of how they do it, investors should learn more about ETFs, because they're here to stay—and are growing more important every day.
ETFs are passive mutual funds and trusts that trade like stocks on major exchanges; they can be bought or sold anytime during the trading day. They held a record $940 billion of assets in the U.S. on Oct. 31, up from $794 billion at year-end 2009, and are on track to hit $1 trillion around the end of 2010.
Net inflows totaled $89 billion in the first 10 months of the year, as investors poured money into ETFs focused on developing-market stocks, bonds and precious metals. Exchange-traded funds are gaining market share at the expense of traditional mutual funds, which (excluding money-market funds) hold about $8 trillion of assets.
The benefits of exchange-traded funds include low fees, relative to mutual funds, transparency of investments and tax efficiency because of low portfolio turnover. These funds provide exposure to specific indexes, like the Standard & Poor's 500 or Russell 2000, as well as such investments as gold, natural gas, junk bonds, inflation-protected Treasuries and master limited partnerships. "A lot of investors are realizing the benefits of diversification, and ETFs allow broad diversification at low cost," says Gus Sauter, chief investment officer at Vanguard. It's understandable that investors favor broader portfolios because a U.S-focused equity strategy hasn't done well in the past 10 years, in which the S&P 500 has essentially been flat. As global economic power shifts away from developed markets, investors want exposure to rising countries like China, India and Brazil.
Active traders are heavily involved with exchange-traded funds. Many day traders now play ETFs, including volatile ones that move by double and triple the daily change in their underlying indexes. Popular day-trading vehicles include the Direxion Daily Financial Bull 3x Shares (FAS) and Direxion Daily Financial Bear 3x Shares (FAZ) that offer triple leverage and triple inverse leverage to the financial component of the Russell 1000 index.
The ETF business is highly concentrated, with the 10 largest funds—out of a universe of about 1,000—accounting for 40% of all assets and three just issuers, BlackRock's (BLK) iShares, State Street Global Advisors and Vanguard, controlling 82% of industry assets. Trading in ETFs averages $62 billion a day and accounts for about 25% of the volume on U.S. exchanges.
ETFS ARE A GREAT democratizing force. With a click of a mouse, individuals can get access to stocks in virtually every corner of the world and to assets like commodities that can be cumbersome to buy and largely have been limited to institutions.
Try purchasing 100,000 ounces of silver and then finding a safe place to store it. But it's relatively easy to purchase 100,000 shares of the iShares Silver Trust (SLV, each of whose shares equals one ounce of the metal), which has attracted $9 billion since its introduction in 2006. The largest commodity ETF, the SPDR Gold Trust (GLD), now holds $60 billion of the metal in London vaults. Its popularity has played a role in gold's 25% rise this year, to $1,365 an ounce.
A Booming Sector
More than 1,000 exchange-traded funds exist, covering everything from emerging-market stocks to energy to U.S. blue chips and Treasury bonds. Through October, ETFs pulled in a net $89 billion in assets this year.
[Roundup chart]
Each GLD share, now at $134, equals 1/10th of an ounce of gold, minus a management fee of 0.40% a year. That modest fee has been well worth paying, given the doubling in gold's price since 2008.
Critics say that an influx of ETF money may be contributing to a bubble in some commodities like silver, which has jumped 20%, to $26 an ounce, since Sept. 30.
Investors have been focusing on commodities and other hard assets to play growing demand in the developing world and amid fear that the Federal Reserve's controversial plan to print money via the purchase of $600 billion of U.S. Treasury securities over the coming months will debase the dollar and spur inflation. Cotton has doubled in price since midsummer and a new cotton exchange-traded note, the iPath Dow Jones-UBS Cotton (BAL) is up by a similar amount.
Many real users of commodities contend that investment demand has distorted markets. Gold jewelry demand, for instance, has fallen as the metal's price has shot up. There is a rush to roll out the first physical U.S. copper ETF (see ETF Focus), whose launch could further propel prices of that key industrial metal, already up 20% this year, to $4 a pound. That said, the presence of an ETF on natural gas, U.S. Natural Gas (UNG), hasn't helped gas prices, which are down 35% this year to $3.70 per million BTUs.
The Biggest ETFs
The long rally in gold has made GLD the second-largest ETF.
Assets Recent YTD
Fund/Ticker (bil) Price Total Return*
SPDR S&P 500/SPY $80.6 $121.64 11%
SPDR Gold Trust/GLD 55.8 137.66 28
iShares MSCI Emerg Mkts/EEM 48.0 47.56 16
Vanguard Emerging Markets/VWO 41.0 48.36 19
iShares MSCI EAFE/EFA 36.2 57.92 8
PowerShares QQQ Trust/QQQQ 23.2 53.39 18
iShares S&P 500/IVV 23.1 122.05 11
iShares Barclays TIPS Bond/TIP 20.7 110.92 9
Vanguard Total Stock Market/VTI 15.4 62.47 13
iShares iBoxx $ Invt Grade Corp/LQD 14.5 111.23 12
Assets as of Oct. 31. *Total return as of Nov. 11.
Sources: BlackRock; Bloomberg
Discount and full-service brokers want to capitalize on the ETF boom. Financial advisors who once picked stocks for clients and later selected mutual funds have morphed into asset allocators, and ETFs are an easy and low-cost way to get diversification. The annual expenses on the average one are around 0.50%—one-half to one-third the fees of many mutual funds—and many ETFs charge 0.10% or less.
"There is no better way for individuals to build diversified investment portfolios. Every asset class is available at rock-bottom costs," says Charles Schwab, founder and chairman of Charles Schwab (SCHW).
Schwab has made a major push into ETFs; its clients now hold $100 billion worth of them. The brokerage firm offers managed ETF portfolios, tailored to individual investment goals and risk tolerance, for investors willing to put up a minimum of $100,000. The fee is 0.75% annually for accounts up to $500,000, and lower for levels above that. Overall, the average total yearly fee—including the portion that pays for ETF expenses—is reasonable, at close to 1%.
The Most Traded ETFs
Emerging markets' strength has boosted EEM's popularity.
Assets Average Daily Volume
Fund/Ticker (bil) (bil) ('000 Shr)
SPDR S&P 500/SPY $80.6 $20.5 175,141
iShares Russell 2000/IWM 12.8 3.6 51,638
PowerShares QQQ Trust/QQQQ 23.2 3.5 70,081
iShares MSCI Emerg Markets/EEM 48.0 2.7 57,810
SPDR Gold Trust/GLD 55.8 2.3 17,394
iShares MSCI Brazil Index/EWZ 11.8 1.2 15,923
Financial Select Sector SPDR/XLF 6.0 1.1 77,958
iShares MSCI EAFE Index/EFA 36.2 0.9 15,976
iShares FTSE/Xinhua China 25/FXI 8.5 0.8 18,486
ProShares UltraShort S&P 500/SDS 3.0 0.8 29,627
All data through Oct. 31.
Sources: BlackRock; Bloomberg
Schwab also has rolled out its own ETFs, which have attracted $2 billion in assets and which its customers can trade commission-free. Fidelity also lets clients trade certain ETFs without paying a commission, and TD Ameritrade (AMTD) allows free trades on some 100 ETFs.
One obstacle to growth is unfamiliarity. "If you asked eight out of 10 people, they probably wouldn't know what ETF stands for," says Peter Crawford, a senior vice president at Schwab's client group. Just 17% of Schwab's retail clients now own exchange-traded funds.
AMONG THE KEY differences between mutual funds and ETFS are that mutual funds can only be traded once a day, while exchange-traded funds can be bought or sold whenever exchanges are open. Most mutual funds are actively managed, while virtually all ETFs are passive. Actively managed ETFs probably will remain scarce because government regulators appear loath to approve them. Active managers are reluctant to disclose their holdings daily, partly for competitive reasons. ETFs, in contrast, provide such disclosure.
How do exchange-traded funds add assets? When investors buy shares, the ultimate sellers are designated market makers. When these market makers see their inventories depleted, they create new shares by purchasing the underlying investments and then delivering them to the ETF manager for new shares. Likewise, heavy selling of exchange-traded funds prompts market makers to liquidate the underlying investments, extinguishing shares.
The most actively traded ETF is the original, the SPDR S&P 500 (SPY), which turns 18 years old in January. Others include the iShares Russell 2000 (IWM), which invests in the popular small-cap index; the PowerShares QQQ Trust (QQQQ), which buys stocks in the Apple-heavy Nasdaq 100 index, and the iShares MSCI Emerging Markets (EEM), which holds stocks throughout the developing world.
Who Oversees the Most Assets
Although the industry is expanding, BlackRock (through iShares), State Street and Vanguard manage 82% of the assets in ETFs.
2010
Assets No. Of Inflows
Provider Total (bil) % Total ETFs (bil)
iShares $426.7 45.4% 218 $24.5
State St. Global 213.5 22.7 93 7.3
Vanguard
135.0
14.4 62 32.1
PowerShares
41.7
4.4 117 4.8
ProShares 24.4 2.6 111 4.0
Van Eck Associates 17.3 1.8 29 2.4
Deutsche Bank 11.5 1.2 36 -2.7
Bank of New York 10.8 1.2 1 1.2
WisdomTree 8.9 0.9 44 2.1
Barclays (iPath) 8.3 0.9 38 3.3
All data through Oct. 31. Sources: BlackRock; Bloomberg; National Stock Exchange
Hedge funds use ETFs to bet for or against different sectors in the stock market and as a hedge against their long holdings. Hedge funds, for instance, are believed to account for a high percentage of the heavily shorted SPDR S&P Retail (XRT) and the SPDR KBW Regional Banking ETF (KRE). A hedge fund might short the KRE as a bet against regional bank stocks or to hedge against a long position in bank stocks. Some investors think the emergence of ETFs has made it too easy for big investors to short shares, adding to market volatility.
But some of the largest ETFs aren't heavily traded because they're favored by buy-and-holders. These include several bond ETFs, including the iShares Barclays TIPS Bond Fund (TIP), which invests in inflation-protected Treasuries, and the iShares iBoxx Investment-Grade Corporate Bond (LQD), which holds high-grade corporate bonds.
Vanguard has made the biggest inroads in ETFs, gathering an industry-leading $32 billion in net assets this year, due in part to fees that average just 0.18% annually—a third of the industry average.
THE ISHARES BUSINESS is a great one. It generates operating-profit margins around 40% for BlackRock, which bought it from Barclays for $14 billion last year, when the British bank was reeling from the financial crisis. BlackRock doesn't need highly paid active managers to run the ETFs, and any incremental assets they attract have extremely high margins. The purchase was a shrewd diversification move by BlackRock boss Laurence Fink. A once-obscure bond manager, BlackRock now manages $3.4 trillion in assets and has a $30 billion stock-market value, tops among publicly traded U.S. asset managers.
Vanguard Emerging Markets (VWO) and the iShares MSCI Emerging Markets (EEM) are locked in a battle for supremacy over the hottest current investment group: developing-country stock funds. The iShares ETF is larger at $48 billion, but the Vanguard fund, at $40 billion, is rapidly gaining, thanks to lower fees—0.27% versus 0.72%— and a larger pool of investments that lets Vanguard more closely track the underlying MSCI Emerging Markets index. The Vanguard fund was up 14% through Oct. 31, almost exactly matching the index, while the iShares fund had gained 11.4%.
The most controversial ETFs are those designed to move two and three times the daily change in their underlying indexes by using leverage or financial derivatives. There are 290 leveraged and inverse ETFs, with $40 billion in assets, BlackRock says.
Other Notable ETFs
These all offer an easy way to play specific investments, markets or sectors.
Recent YTD Assets
Fund/Ticker Price Total Return (bil) Comment
iShares Silver Trust/SLV $27.11 62% $9.6 Biggest silver ETF, up 12% in past month
SPDR S&P Dividend/ SDY 51.75 15 4.4 Buys S&P dividend "aristocrats"
SPDR Barclays Capital High Yield Bond/JNK 40.44 13 6.3 Invests in U.S. junk bonds
iShares S&P National AMT-Free Muni/MUB 102.58 4 2.2 Buys U.S. municipal bonds
iPath S&P 500 VIX Short-Term Futures/VXX 45.43 -67 1.7 Offers play on depressed VIX index
Alerian MLP/AMLP 16.02 NA 0.4 Buys master limited partnerships
US Natural Gas Fund/UNG 5.67 -42 2.5 Play on battered gas market
ProShares UltraShort 20+Year Treasury/TBT 36.44 -27 5.4 Anti-Bernanke play on higher rates
Vanguard European/VGK 51.27 7 2.9 Buys European stocks, yields 4%
PowerShares DB Commodity/DBC 26.36 8 4.7 Offers broad commodity exposure
All data as of Nov. 11. NA=Not applicable. Source: Bloomberg
These funds have been criticized because over long periods, they often don't track the underlying indexes. That isn't because of an inherent flaw, but because of the effects of compounding often large daily movements.
As a result, the Financial Industry Regulatory Authority (Finra) said last year that "inverse and leveraged ETFs that reset daily typically are unsuitable for retail investors who plan to hold them for longer than one trading session, particularly in volatile markets." Investors seem to be heeding this advice, because the Direxion 3x financial stock funds have a combined $3 billion in assets, despite enormous daily trading volume averaging 45 million shares for the bullish fund (FAS) and 54 million for the bearish one (FAZ).
To take a simple example, if financial stocks rise 10% one day and fall 10% the next day, the index will drop 1%, to 99, from the original 100 level. A three times leveraged bullish fund would rise to 130 on the first day and then fall to 91 on the second, a 9% drop. The bearish fund would slip to 70 on the first day before rallying to 91 on the second, also producing a 9% decline.
Both the FAS and FAZ have been tough on investors this year and show the pitfalls of an extended investment in leveraged ETFs. The FAS is down just 4%, while the FAZ has plunged 40% and is down 99% since early 2009. All the inverse double-leveraged sector ETFs on the S&P 500 are off sharply this year.
In a cover story at the start of 2009, Barron's argued long-term Treasury yields, then around 2.70%, probably would go higher. That's been the case, with the 30-year T-bond, now yielding 4.25%. The ProShares UltraShort 20-Year Treasury (TBT), however, is down about 10% since then, to 35. It offers the inverse of twice the daily change in the price of long-term Treasuries.
Despite its drawbacks, the TBT is one of the few ways for individuals to bet on higher long-term Treasury rates. The rates already have risen 0.25 percentage point this month and could approach 5% if the Fed's controversial second quantitative easing program boosts inflation and a rout ensues in the bond market. It isn't easy for individuals to short Treasuries. Another alternative is to short the iShares Barclays Capital 20+ Year Treasury Bond ETF (TLT).
Dividend-oriented equity ETFs have been popular this year, including the SPDR S&P Dividend ETF (SDY), which buys S&P's dividend "aristocrats" with a history of 25 years of payout increases, and the iShares DJ Select Dividend Index Fund (DVY), which tracks the Dow Jones dividend index. The SDY's top three holdings are CenturyLink (CTL), Pitney Bowes (PBI) and Cincinnati Financial (CINF), while the DVY's are Lorillard (LO), CenturyLink (CTL) and Chevron (CVX).
It's easy to get low-cost bond exposure via ETFs, including the SPDR Barclays Capital High-Yield Bond (JNK), which now yields 8.5%, and the iShares S&P National AMT-Free Muni (MUB), which yields 3.5%.
Master limited partnerships focused on transporting energy have done very well in the past two years because of investors' hunger for dividends. The Alerian MLP index is up 27% this year, after gaining 62% in 2009. One of the problems with MLPs is that investors get K-1 dividend tax forms—which are more complicated to deal with at tax time than 1099s. The Alerian MLP ETF (AMLP), however, offers 1099s to holders, along with the diversification of 25 MLPs.
The PowerShares DB Commodity (DBC) is a broad commodity ETF with a roughly 50% weighting in energy, while the U.S. Natural Gas fund offers a direct play on natural gas. The UNG is off 45% this year and was down 87% from its 2007 inception through Sept. 30, thanks to weakness in gas prices.
COMMODITY ETFS like the UNG that use futures can be hurt by contango, a term that simply means that future prices are higher than current or spot prices. Contango forces an ETF to roll its spot contracts into higher-priced futures. The UNG has badly trailed gas prices since its creation. That said, it offers a play on the depressed gas market. Prices are down 35% this year, to $3.70 per million BTUs, and are trading at a historically low valuation, relative to oil, now at $86 a barrel. Some investors prefer ETFs that hold physical assets, although that can be tough for some commodities, owing to storage constraints.
Investors can get ETF information from many Websites, including cefconnect.com, xtf.com, etfdb.com and etftrends.com, as well as Morningstar, Yahoo! and Marketwatch.com.
Regardless of how they do it, investors should learn more about ETFs, because they're here to stay—and are growing more important every day.
Sunday, July 18, 2010
Recent Buys and current news
July News is in so far. On 7/6/10 I purchased EOS, FSC and PFE $8.00 each company. On 7/13/10 I purchased ED, IBM, BPT at $8.00 each. My june statement has arrived. Equities and stock for June $351.11 value at may end was $261.44. Dividends for the month Jumped to $2.25 from .79 cents the period before.
My top three holdings for June were GE 1.594 Shares $22.99, 2nd IGD 1.9271 shares $20.06, and #3 is AOD 3.7947 shares $18.78. Top 3 dividends in June were AOD .44 cents , FRO .25 cents, DO Special Dividend .13 cents Regular Dividend .01 cent. Total of 12 buys for June. Total 33 dividends collected in June.
Well thatis it for now cheers all.
My top three holdings for June were GE 1.594 Shares $22.99, 2nd IGD 1.9271 shares $20.06, and #3 is AOD 3.7947 shares $18.78. Top 3 dividends in June were AOD .44 cents , FRO .25 cents, DO Special Dividend .13 cents Regular Dividend .01 cent. Total of 12 buys for June. Total 33 dividends collected in June.
Well thatis it for now cheers all.
Sunday, June 20, 2010
Wowzers Were did da time go.............
I stumbled across my password the other day finally can do some updated. The wife had a heart attack I had to sell all that had at folio investing and recover the family. I now have a roth ira through sharebuilder.com Get ya own Account here. I am still using the same investing style as before. I put in 50.00 every payday and invest $5.00 for each day that I work (Kinda like a reward for having to go to work and deal with all the drama everyday that goes with work). With that being said my first deposit was on 4-16-2010. My account today stands at $346.21. I am a subscriber to the plan so I pay a flat $12.00 per month for 12 trades per month. I am long 52 different holdings in what I think is a pretty diversified portfolio. My current Holdings ranked by the amount held in the account 1 being my biggest holding and 52 being my smallest.
My current holdings include the following, AOD, IGD, MRK, WMT, TNH, FRO, DO, GE, XOM, INTC, PHK, EOS, PTY, DPD, IID, PHT, GDX, NLY, BMY, CTL, VNQ, CFP, CAH, KMB, O, PEP, SYY, CAT, PG, TPZ, ESD, LQD, EOI, ABT, PGX, JNK, PFF, VWO, GGN, MMM, IGI, BDX, XLF, BAX, FSC, SPY, PFE, ED, KMP, BPT, IBM, AND BP.Those are all my holdings that i plan to stick with for now and the ones I talk about on my blog. In my challenge to beat the company sponsored 401k.
I try to invest with a huge focus on dividends and reinvesting of the dividends you can not beat having your money working for you. Most of the time if a holding cuts its dividend I will sell it the next chance I get (however different in the case of bp). As this stock i am not sure what to do with so I will just hold it for the time being.
Dividends Paid this month include, INTC, PFE, WMT, DO on 6-1-2010, LQD, PFF on 6-7-2010, JNK on 6-9-2010, IBM on 6-9-2010, XOM, MMM on 6-14-2010, ED, IGD, IID, and O on 6-15-2010 and CTL on 6-21-2010. All dividends are automatically reinvested back into the same stock they come from.
I purchased DO, IGI, FRO, GDX and PHT on the 6-01-2010 value $5.00 each. On 6-8-210 I purchased AOD 2.05 shares for $13.00 and 1.1321 shares of IGD for $12.00. On 6-15-210 I purchased 0.3422 shares of MRK for $12.00 and 0.2525 shares of WMT for $13.00. And next week I plan to purchase on Tuesday $12.00 worth of IBM and $13.00 worth of ED.
It seems like it is taken for ever to get this going all over again, but I know Rome wasn't built in a day. So I be using this blog to share my thoughts and current investments. Feel free to follow along with me as I try to once again build a nest egg of money working for me.
My current holdings include the following, AOD, IGD, MRK, WMT, TNH, FRO, DO, GE, XOM, INTC, PHK, EOS, PTY, DPD, IID, PHT, GDX, NLY, BMY, CTL, VNQ, CFP, CAH, KMB, O, PEP, SYY, CAT, PG, TPZ, ESD, LQD, EOI, ABT, PGX, JNK, PFF, VWO, GGN, MMM, IGI, BDX, XLF, BAX, FSC, SPY, PFE, ED, KMP, BPT, IBM, AND BP.Those are all my holdings that i plan to stick with for now and the ones I talk about on my blog. In my challenge to beat the company sponsored 401k.
I try to invest with a huge focus on dividends and reinvesting of the dividends you can not beat having your money working for you. Most of the time if a holding cuts its dividend I will sell it the next chance I get (however different in the case of bp). As this stock i am not sure what to do with so I will just hold it for the time being.
Dividends Paid this month include, INTC, PFE, WMT, DO on 6-1-2010, LQD, PFF on 6-7-2010, JNK on 6-9-2010, IBM on 6-9-2010, XOM, MMM on 6-14-2010, ED, IGD, IID, and O on 6-15-2010 and CTL on 6-21-2010. All dividends are automatically reinvested back into the same stock they come from.
I purchased DO, IGI, FRO, GDX and PHT on the 6-01-2010 value $5.00 each. On 6-8-210 I purchased AOD 2.05 shares for $13.00 and 1.1321 shares of IGD for $12.00. On 6-15-210 I purchased 0.3422 shares of MRK for $12.00 and 0.2525 shares of WMT for $13.00. And next week I plan to purchase on Tuesday $12.00 worth of IBM and $13.00 worth of ED.
It seems like it is taken for ever to get this going all over again, but I know Rome wasn't built in a day. So I be using this blog to share my thoughts and current investments. Feel free to follow along with me as I try to once again build a nest egg of money working for me.
Tuesday, August 25, 2009
Pimco launches first TIPS ETF
The world's biggest bond-fund manager on Monday launched the first of a new line of exchange-traded funds that focus on inflation protection. The Pimco 1-5 Year U.S. TIPS Index Fund (STPZ) is the first of three planned Treasury Inflation-Protected Securities ETFs from the firm, a unit of Allianz (AZ) . The two other ETFs, Pimco 15+ Year U.S. TIPS Index Fund and Pimco Broad U.S. TIPS Index Fund, will launch in early September.
Disclosure NONE
Disclosure NONE
Tuesday, August 18, 2009
Vanguard registers for seven bond ETFs
Vanguard today filed a registration statement with the Securities and Exchange Commission to offer seven new bond index exchange traded funds in what some industry experts believe to be a direct challenge to iShares, the dominant fixed-income ETF provider.
Three of the ETFs are expected to invest in U.S. Treasuries, three in corporate bonds and one in mortgage-backed securities, according to the filling from The Vanguard Group Inc. of Malvern, Pa.
Three of the ETFs are expected to invest in U.S. Treasuries, three in corporate bonds and one in mortgage-backed securities, according to the filling from The Vanguard Group Inc. of Malvern, Pa.
The ETFs — planned as shares of proposed bond index funds — all come with expected expense ratios of 0.15%.
That is the same expense ratio iShares, a unit of Barclays Global Investors of San Francisco, charges for its comparable U.S. Treasury ETFs, but lower than the 0.20% it charges for comparable ETFs that invest in corporate bonds and the 0.25% it charges for its comparable mortgaged-backed ETF.
It appears as if Vanguard’s goal is to wrest “control of the exchange-traded bond fund market from Barclays’ iShares group,” Daniel Wiener, the Brooklyn, N.Y.-based chairman and chief executive of Adviser Investment Management Inc. of Newton, Mass., which manages more than $1 billion in assets, wrote in an e-mail.
Vanguard, however, has a long way to go before it can best iShares.
Vanguard offers five fixed-income ETFs with more than $8 billion in assets, while iShares offers 27 bond ETFs with total assets of more than $63 billion, according to Morningstar Inc. of Chicago.
But by pricing its bond ETFs lower than iShares – at least with regards to corporate and mortgaged-backed funds — it’s off to a good start, according to industry experts.
“I think cost is going to be at the top of investors’ minds,” he said.
Otherwise, there isn’t anything unique about the proposed Vanguard ETFs.
The proposed funds will be pegged to Barclays Capital indexes, formerly Lehman Capital indexes.
Barclays acquired the indexes, developed by Lehman Brothers Holdings Inc., following the New York investment bank’s Sept. 15 filing for Chapter 11 bankruptcy protection.
Vanguard, however, believes its proposed ETFs will offer investors something different.
For example, comparable iShares ETFs track credit indexes, rather than corporate indexes.
Credit indexes include exposure to bonds issued by “supranationals” —institutions established and controlled by their sovereign government — which tend to be AAA bonds with lower yields, said Rebecca Cohen, a spokeswoman at Vanguard.
For its part, Vanguard said expanding its bond offerings makes sense given the firm’s expertise.
“Vanguard has a quarter-century of experience in bond index management, and expanding our range of funds is a logical extension of our capabilities,” Bill McNabb, president and chief executive of Vanguard, said in a statement. “Financial advisers and institutions want to construct broadly diversified fixed income portfolios, while retaining the ability to emphasize particular sectors or durations. Working in concert, our broad-based bond index funds and these new, more targeted funds can help to achieve this goal.”
But at least one financial adviser speculated there might be another motive for Vanguard.
“ETFs are going to find their way to 401(k) plans perhaps more rapidly than we believe,” William Koehler, chief investment officer of ETF Portfolio Solutions Inc., a Leawood, Kan., firm with $50 million under management.
Barclays launched the “iShares in 401(k)” program in May to help financial advisers use ETFs as investment options within 401(k) retirement plans.
Vanguard may sense that it needs to increase the number of bond ETFs it offers if it wants to market its ETFs in the retirement space, Mr. Koehler said.
Expanding its bond ETF lineup, however, has nothing to do with an attempt by Vanguard to get ETFs into retirement plans, Ms. Cohen said.
In some cases, it wouldn’t be appropriate for retirement plans to use the ETFs, given that institutional shares of the proposed funds are cheaper with an expense ratio of 0.09%, and available to companies and organizations with account balances of $5 million or more, she said.
Disclosure NONE
Eaton Vance Closed-End Enhanced Equity Income Funds Declare Monthly Distributions
Eaton Vance Management, the Boston-based investment adviser, today announced the monthly distributions declared on the common shares of two of its closed-end equity funds (the "Funds"). The record date for the distributions is August 24, 2009, and the
payable date is August 31, 2009. The ex-date is August 20, 2009. The
distribution per share for each Fund is as follows:
Distribution
Fund Per Share
Eaton Vance Enhanced Equity Income Fund (NYSE: EOI) $0.137
Eaton Vance Enhanced Equity Income Fund II (NYSE: EOS) $0.144
At this time the Funds believe that a portion of the August
distribution may be comprised of amounts from sources other than net
investment income. If that is the case, you will be notified in writing.
Further information will be available prior to the payment date at
individuals.eatonvance.com. The final determination of tax characteristics
of the Fund's distributions will occur after the end of the year, at which
time it will be reported to the shareholders.
The Funds are managed by Eaton Vance Management, a subsidiary of Eaton
Vance Corp. (NYSE: EV), based in Boston, one of the oldest investment
management firms in the United States, with a history dating back to 1924.
Eaton Vance and its affiliates managed $143.7 billion in assets as of July
31, 2009, offering individuals and institutions a broad array of investment
products and wealth management solutions. The Company's long record of
providing exemplary service and attractive returns through a variety of
market conditions has made Eaton Vance the investment manager of choice for
many of today's most discerning investors. For more information about Eaton
Vance, visit http://www.eatonvance.com.
Disclosure I am long EOS shares.
payable date is August 31, 2009. The ex-date is August 20, 2009. The
distribution per share for each Fund is as follows:
Distribution
Fund Per Share
Eaton Vance Enhanced Equity Income Fund (NYSE: EOI) $0.137
Eaton Vance Enhanced Equity Income Fund II (NYSE: EOS) $0.144
At this time the Funds believe that a portion of the August
distribution may be comprised of amounts from sources other than net
investment income. If that is the case, you will be notified in writing.
Further information will be available prior to the payment date at
individuals.eatonvance.com. The final determination of tax characteristics
of the Fund's distributions will occur after the end of the year, at which
time it will be reported to the shareholders.
The Funds are managed by Eaton Vance Management, a subsidiary of Eaton
Vance Corp. (NYSE: EV), based in Boston, one of the oldest investment
management firms in the United States, with a history dating back to 1924.
Eaton Vance and its affiliates managed $143.7 billion in assets as of July
31, 2009, offering individuals and institutions a broad array of investment
products and wealth management solutions. The Company's long record of
providing exemplary service and attractive returns through a variety of
market conditions has made Eaton Vance the investment manager of choice for
many of today's most discerning investors. For more information about Eaton
Vance, visit http://www.eatonvance.com.
Disclosure I am long EOS shares.
ING Global Equity Dividend and Premium Opportunity Fund and ING International High Dividend Equity Income Fund Declare Monthly Distributions
ING Investments, LLC announced the monthly distributions on the common shares of two of its closed-end funds: ING Global Equity Dividend and Premium Opportunity Fund
(NYSE: IGD) and ING International High Dividend Equity Income Fund (NYSE:
IID) (each a "Fund" and collectively, the "Funds"). With respect to each
Fund, the distribution will be paid on September 15, 2009, to shareholders
of record on September 3, 2009. The ex-dividend date is September 1, 2009.
The distribution per share for each Fund is as follows:
Fund Distribution Per Share
---- ----------------------
ING Global Equity Dividend and Premium Opportunity
Fund (NYSE: IGD) $0.156
ING International High Dividend Equity Income Fund
(NYSE: IID) $0.163
Each Fund intends to make regular monthly distributions based on the
past and projected performance of the Fund. The amount of monthly
distributions may vary, depending on a number of factors. As portfolio and
market conditions change, the rate of distributions on the common shares
may change. There can be no assurance that a Fund will be able to declare a
distribution in each period.
The tax treatment and characterization of a Fund's distributions may
vary significantly from time to time depending on the net investment income
of the Fund and whether the Fund has realized gains or losses from its
options strategy versus gain or loss realizations in the equity securities
in the portfolio. Each Fund's distributions will normally reflect past and
projected net investment income, and may include income from dividends and
interest, capital gains and/or a return of capital. The final tax
characteristics of the distributions cannot be determined with certainty
until after the end of the calendar year, and will be reported to
shareholders at that time.
IGD estimates that each distribution for the current fiscal year as of
July 31, 2009, will be comprised of approximately 24% ordinary income and
76% return of capital.
IID estimates that each distribution for the current fiscal year as of
July 31, 2009, will be comprised of approximately 15% ordinary income and
85% return of capital.
The portion of each Fund's monthly distributions estimated to come from
the Fund's option strategy, for tax purposes, may be treated as a
combination of long-term and short-term capital gains, and/or a return of
capital. The tax character of each Fund's option strategy is largely
determined by movements in, and gain and loss realizations in the
underlying equity portfolio.
Certain statements made on behalf of the Funds in this release are
forward- looking statements. The Funds actual future results may differ
significantly from those anticipated in any forward-looking statements due
to numerous factors, including but not limited to a decline in value in
equity markets in general or the Funds investments specifically. Neither
the Funds nor ING undertake any responsibility to update publicly or revise
any forward-looking statement.
ING Investments, LLC, the manager of the Funds, is part of ING, a
global financial institution of Dutch origin offering banking, investments,
life insurance and retirement services to over 75 million private,
corporate and institutional clients in more than 50 countries. With a
diverse workforce of about 125,000 people, ING comprises a broad spectrum
of prominent companies that increasingly serve their clients under the ING
brand.
SHAREHOLDER INQUIRIES: ING Funds Shareholder Services at (800) 992-0180
Disclosure I am long IID and IGD shares.
(NYSE: IGD) and ING International High Dividend Equity Income Fund (NYSE:
IID) (each a "Fund" and collectively, the "Funds"). With respect to each
Fund, the distribution will be paid on September 15, 2009, to shareholders
of record on September 3, 2009. The ex-dividend date is September 1, 2009.
The distribution per share for each Fund is as follows:
Fund Distribution Per Share
---- ----------------------
ING Global Equity Dividend and Premium Opportunity
Fund (NYSE: IGD) $0.156
ING International High Dividend Equity Income Fund
(NYSE: IID) $0.163
Each Fund intends to make regular monthly distributions based on the
past and projected performance of the Fund. The amount of monthly
distributions may vary, depending on a number of factors. As portfolio and
market conditions change, the rate of distributions on the common shares
may change. There can be no assurance that a Fund will be able to declare a
distribution in each period.
The tax treatment and characterization of a Fund's distributions may
vary significantly from time to time depending on the net investment income
of the Fund and whether the Fund has realized gains or losses from its
options strategy versus gain or loss realizations in the equity securities
in the portfolio. Each Fund's distributions will normally reflect past and
projected net investment income, and may include income from dividends and
interest, capital gains and/or a return of capital. The final tax
characteristics of the distributions cannot be determined with certainty
until after the end of the calendar year, and will be reported to
shareholders at that time.
IGD estimates that each distribution for the current fiscal year as of
July 31, 2009, will be comprised of approximately 24% ordinary income and
76% return of capital.
IID estimates that each distribution for the current fiscal year as of
July 31, 2009, will be comprised of approximately 15% ordinary income and
85% return of capital.
The portion of each Fund's monthly distributions estimated to come from
the Fund's option strategy, for tax purposes, may be treated as a
combination of long-term and short-term capital gains, and/or a return of
capital. The tax character of each Fund's option strategy is largely
determined by movements in, and gain and loss realizations in the
underlying equity portfolio.
Certain statements made on behalf of the Funds in this release are
forward- looking statements. The Funds actual future results may differ
significantly from those anticipated in any forward-looking statements due
to numerous factors, including but not limited to a decline in value in
equity markets in general or the Funds investments specifically. Neither
the Funds nor ING undertake any responsibility to update publicly or revise
any forward-looking statement.
ING Investments, LLC, the manager of the Funds, is part of ING, a
global financial institution of Dutch origin offering banking, investments,
life insurance and retirement services to over 75 million private,
corporate and institutional clients in more than 50 countries. With a
diverse workforce of about 125,000 people, ING comprises a broad spectrum
of prominent companies that increasingly serve their clients under the ING
brand.
SHAREHOLDER INQUIRIES: ING Funds Shareholder Services at (800) 992-0180
Disclosure I am long IID and IGD shares.
Sunday, August 16, 2009
How Some Are Hedging Inflation Risk With ETFs
Some fear that record government borrowing could induce a period of high inflation and that bonds ultimately may not be worth as much as they used to be. However, Treasury inflation-protected securities (TIPS) and related exchange traded funds (ETFs) may be a way to protect your wealth.
TIPS can be one way to stave off the devaluation on borrowed money that comes from inflation, according to Steve Chiotakis for Marketplace. TIPs are bonds that have an increase or decrease in its principal based on the Consumer Price Index.
Reporter Jeremy Hobson says the Treasury Department will be announcing a boost in sales of TIPS.
TIPS have been gaining more attention after a series of weak Treasury auctions that have been followed by successful TIPS auctions. China has also been complaining about the effects of inflation in the United States, and their government is interested in buying more TIPS to protect themselves. As a result, the Treasury department will boost the sale of the bonds, say Rob Copeland and Maya Jackson Randall for The Wall Street Journal.
TIPs may be beneficial for investors after the U.S. government’s borrowing spree, but it may not be so great for the taxpayer. One strategist calculated that without inflation, 10-year TIPS are yielding 1.82%, whereas the 10-year Treasury is yielding 3.75%.
Disclosure I do not own TIP at this time.
Monday, August 3, 2009
3 High-Yield ETFs You May Be Missing
Are you craving more risk and the potential for higher yields in your investments? There are several overlooked high-yield exchange traded funds (ETFs) that are gaining as investors become more risk-tolerant. 
Investors can use ETFs for a number of reasons, including to capture capital appreciation and above-average dividends, writes Matthew D. McCall for Seeking Alpha. McCall provides a few ETFs he believes will have the right amount of performance and dividend yields. We should note, too, that this is by no means a complete list of all high-yielding ETFs with good performance – there are many available, so be sure to look around.
SPDR Barclays Capital High Yield Bond (JNK), currently up 23.8% year-to-date, follows corporate high-yield bonds, otherwise known as junk. The ETF also pays out a monthly dividend that comes out to an annual yield of 13%. When the economy goes back to normal, undervalued risky assets could begin to attract more attention.
iShares S&P U.S. Preferred Stock Index (PFF), currently up 27.4% year-to-date, tracks preferred shares of companies, primarily in the financial sector. Annual dividend yield is 11%. The ETF is a good way to tamp down some risk that comes with including the financial sector in an investment portfolio.
Market Vectors High-Yield Muni ETF (HYD), currently up 7.1% in the last three months. HYD is a relatively new ETF that invests mainly in high yield municipal bonds. But around 25% is in investment-grade bonds. HYD has a 30-day SEC yield of 7.16%, which is better than the taxable bonds. Those in the 28% tax bracket will have tax-equivalent yield of 9.94%, and those in the 35% tax bracket will have as much as 11.02%.
It should be noted that HYD is ideal for a taxable account and people in a high tax bracket. JNK and PFF are better for tax-deferred accounts, McCall says.
Always be sure to watch the trend lines first to find areas that have entered into a potential long-term uptrend. Then explore the characteristics of the funds, including volume, assets and yield.
Disclosure I am long HYD, JNK, PFF shares.
Monday, June 29, 2009
Invest in Prospect Capital Corporation's High Dividend
Where can you earn 17% dividend on a US based company? At Prospect Capital Corporation (PSEC). The upcoming dividend is .40625, which is a 16.89% yield at $10.17 share price which will ex-dividend on July 6th 2009. This dividend is the same amount that is had paid out for the prior 4 quarters.
It earns its dividends from investing into companies needing capital. What I like about this company is that the firm has expertise in energy and industrial sectors. It wisely invests in oil and gas, coal, materials, industrials, information technology, utilities, pipeline, storage, power generation, renewable and clean energy, and other types. Energy, materials, and technology are three candidates that have great potential for high ROI, as well as dividend payback.
Insiders are agreeing with me, as insider buying has been regular and intensive. Insider buying is just a clue - but a good one.
Prospect Capital has raised capital recently. It announced it has raised $64 million in gross proceeds from its public offering of roughly 7.8 million shares of common stock. Those shares were priced at $8.25 and investors are probably believing that the newly raised capital will be invested in more companies, that is in demand in this tight economy by companies of all types. This quarter's dividend is a repeat of the priors, the next quarter dividend could go down due to share dilution.
See this Yahoo Finance chart for more information about previous dividends and stock price movement.
We see stock appreciation over the long term, when the US & Canada economy picks back up in 2010 and 2011. In the mean time, why not earn a really nice dividend? Examine the chart closely and potentially buy on the dips. The chart shows a share price drop after each dividend payout.
Disclosure I am long PSEC shares in my Closed end fund folio.
Will Corporate Bond ETFs Make It or Break It? | ETF Trends
What effect will the rise in government bond yields have on corporate bonds and the exchange traded funds (ETFs) that track them? 
Government bond yields have been rising at an alarming rate. This is indicative that fear is starting to leave the markets and some are optimistic that an economic recovery is in sight. This could be good for corporate bonds in that creditworthiness should recover along with profits, states Richard Barley of The Wall Street Journal.
On the other hand, if government yields are rising because of the huge amount of paper being printed to fund record deficits, then corporate bonds could be in trouble. As long as corporate bond yields remain in the 6%-7% range in a low-interest rate world, they will be attractive. Corporate bonds offer a good opportunity for investors, as companies’ cash holdings increase as a result of slimming down operational costs, says an official at MFC Global Investment Management.
- iShares GS $ InvesTop TM Corporate Bond Fund (LQD): up 1.4% year-to-date. It yields 5.7%.
For more stories on corporate bonds, visit our corporate bond category.
Kevin Grewal contributed to this article.
Disclosure I am long LQD in my Bond Folio.
Thursday, June 4, 2009
Alpine Total Dynamic Dividend Fund and Alpine Global Dynamic Dividend Fund Declare Regular Monthly Distribution for June, July and August
The Board of Trustees of the Alpine Total Dynamic Dividend Fund (NYSE:AOD - News) and Alpine Global Dynamic Dividend Fund (NYSE:AGD - News) declared the same regular monthly distribution for June, July and August as in the past three months:
Alpine Total Dynamic Dividend Fund (AOD): $0.12 cents per share
Alpine Global Dynamic Dividend Fund (AGD): $0.11 cents per share
Since its inception, January 26, 2007, AOD has declared $5.58 in total distributions. Similarly, AGD, since its August 26, 2006 inception has declared $7.37 in total distributions.
“Notwithstanding the largest number of dividend reductions in decades, the Alpine dividend investment strategies find continuing dividend opportunities as well as growth potential,” said Steve Lieber, Alpine’s Chief Investment Officer.
The Alpine Total Dynamic Dividend Fund offers a unique and balanced approach to optimizing both dividend income and long-term growth of capital.* Alpine scans the globe looking for the best dividend opportunities for investors, employing a multi-cap, multi-sector, and multi-style investment approach. The Fund combines four research-driven investment strategies – Growth, Value, Special Dividends, and Dividend Capture Rotation – to maximize the amount of distributed dividend income and to identify companies globally with the potential for dividend increases and capital appreciation.
Disclosure I am long AOD shares
Alpine Total Dynamic Dividend Fund (AOD): $0.12 cents per share
Alpine Global Dynamic Dividend Fund (AGD): $0.11 cents per share
Since its inception, January 26, 2007, AOD has declared $5.58 in total distributions. Similarly, AGD, since its August 26, 2006 inception has declared $7.37 in total distributions.
“Notwithstanding the largest number of dividend reductions in decades, the Alpine dividend investment strategies find continuing dividend opportunities as well as growth potential,” said Steve Lieber, Alpine’s Chief Investment Officer.
The Alpine Total Dynamic Dividend Fund offers a unique and balanced approach to optimizing both dividend income and long-term growth of capital.* Alpine scans the globe looking for the best dividend opportunities for investors, employing a multi-cap, multi-sector, and multi-style investment approach. The Fund combines four research-driven investment strategies – Growth, Value, Special Dividends, and Dividend Capture Rotation – to maximize the amount of distributed dividend income and to identify companies globally with the potential for dividend increases and capital appreciation.
Disclosure I am long AOD shares
PIMCO Launches First ETF (TUZ); Files For Six More
Mutual fund behemoth PIMCO has been conspicuously absent from the ETF market. Today that changed with the launch of PIMCO 1-3 Year U.S. Treasury Index Fund (NYSE: TUZ). Combine this with reports that Vanguard is bidding to buy the iShares ETF label from parent company Barclays, and it looks like we may be entering a new era of competition in the ETF business.
First, let's take a look at TUZ. At first glance the new fund appears very similar to the iShares 1-3 Year Treasury Fund (NYSE: SHY). PIMCO is waiving fees to bring the expense ratio down to 0.09%, below the 0.15% found in SHY. Look for iShares to respond with lower fees soon. Both TUZ and SHY are aimed at income investors who want the potential for a higher yield than is available in short-term Treasury bills which mature in a year or less, while also keeping interest rate risk relatively low. See the Fact Sheet and Prospectus for more info on TUZ.
For PIMCO to make its very first ETF launch a near-clone of an existing ETF, and then to compete on expenses, is a very bold move. PIMCO also has the trading and marketing muscle to keep its funds active and liquid. The other large fund sponsors cannot ignore this development. At the same time, they will have a hard escaping the high-fee, performance-based culture that served them well for decades.
TUZ is only the beginning; PIMCO has other ETFs on the drawing board including its recent filing for six more - three TIPS and three additional Treasury ETFs. Whatever happens, it seems clear the ETF industry is due for some big changes.
Disclosure: I am long TUZ shares.
Monday, May 4, 2009
Closed-end funds offer MASSIVE PROFIT opportunities
Investors looking for higher yields in today's low interest rate market might consider closed-end funds, said Marc Rappaport, senior managing director of Alpine Woods Capital Investors LLC, especially those that offer unique strategies that fare better when executed in a closed pool/architecture/framework.
Even though closed-end funds have been around for more than 100 years -- since 1893, according to the Closed-End Fund Association, more than 30 years before the first U.S. mutual fund appeared on the scene -- the average investor is not familiar with them.
Mutual funds are open-end, which means they offer to sell their shares to investors on a continuous basis, and to buy them back, or redeem, when shareholders want to reduce or liquidate their holdings.
Closed-end funds are not offered continuously. They are offered to the public in a manner similar to a stock offering -- through an initial public offering; of course, additional shares can be sold to investors in subsequent offerings. A closed-end fund shareholder cannot present a redemption request to the fund; instead, he has to sell his shares in the market like he would sell a stock.
As a result, the investment manager of a closed-end fund has a distinct advantage over a mutual fund manager. The closed-end manager works with a fixed pool of capital. In contrast, a mutual fund manager has to react to inflows of cash, when shareholders buy shares, and outflows, when shareholders redeem their shares. Cash flows can and do affect the manager's decisions over when and what to buy and sell for the portfolio. "In a time of heightened investor fear, mutual fund redemptions rise and managers are forced to sell portfolio holdings when the managers would rather do just the opposite," Rappaport said. In contrast, the closed-end fund manager has the advantage of buying and selling based on his convictions, rather than cash flow management. Theoretically, his performance should reflect this management edge. If you're used to investing in mutual funds, you won't be able to apply the same selection criteria to closed-end funds. There are some major differences. First, be aware that there are two sets of share prices. One is net asset value, which is the end-of-day value of all the holdings of the fund, less expenses. Open-end funds and closed-end funds calculate NAV the same way. The other is market price or market value. Shareholders buy and sell shares of closed-end funds in the stock market throughout the trading day. Since no one is interposed between the shareholder and the fund -- in contrast to exchange traded mutual funds -- the price at which the closed-end fund trades is set by supply and demand, in the same way that a stock's price is determined. More buyers bid up the price; more sellers drive down the price. Because of that dynamic, investors buy shares at or below or above net asset value. Remember that net asset value is the underlying value of all the holdings in the fund, representing the value of the fund if it were liquidated or liquidation value. That means that investors who buy funds at a price below net asset value are buying at a discount. Now, here's the interesting point for income investors. If you buy a dividend-paying closed-end fund at a discount from net asset value, your yield will be higher than the fund's yield. Let me give you an example: Consider a closed-end fund with a net asset value per share of $10 that you bought for $10 and that the net asset value per share and market price both remained $10 for a year. In real life, the net asset value and market price will fluctuate. Assume that the fund paid a monthly dividend that totaled 30 cents per year for a 3 percent annual dividend yield. Now assume that you were able to buy the same fund for only $8 a share. You would still receive your 30 cent per share dividend. But your yield would not be 3 percent -- it would be higher, reflecting the lower price you paid for the shares -- in this case, 3.75 percent. Here's the math: You paid $8 a share for a fund whose net asset value is $10 a share. Your dividend was 30 cents. Thirty cents divided by 8 equals 3.75 percent, which is your annualized distribution yield. The annualized dividend yield reflects the price at which you bought the shares; the yield at net asset value is referred to as the dividend yield. (Be alert to the fact that some closed-end funds' distributions may also include return of capital, meaning some of YOUR principal may be paid out as part of the distribution -- a subject we'll discuss next week). On the other hand, if you paid more than net asset value when you bought shares, your annualized distribution yield would be less than 3 percent. If you paid $12 a share, for example, your yield would be only 2.5 percent. Thirty cents divided by 12. In today's market, you can find funds to buy at discounts as high as 70 percent, turning that same hypothetical 30-cent dividend in my example into a 10 percent yield to the investor -- not to suggest that a prudent investor would buy such as fund solely based on the discount, but you get the idea. Nonetheless, you can't deny that yield advantages are plentiful for income-conscious investors who buy well-selected closed-end funds at a discount. Disclosure I am long 10 different Closed End funds
Nuveen Closed-End Funds Declare Monthly Distributions
Distributions Increase for 80 Municipal Closed-End Funds
Nuveen Investments, a leading global provider of investment services to institutions and high-net-worth investors, today announced that 106 Nuveen closed-end funds had declared regular monthly distributions. These funds represent a broad range of tax-exempt, taxable fixed and floating rate income investment strategies for investors seeking to build sophisticated and diversified long-term investment portfolios for cash flow. The funds' monthly distributions are listed below.
Monthly distributions from Nuveen's municipal closed-end funds and portfolios are generally exempt from regular Federal income taxes, and monthly distributions of single-state municipal funds and portfolios are also exempt from state and, in some cases, local income taxes for in-state residents. Unless otherwise stated in the funds' objectives, monthly distributions of the municipal funds and portfolios may be subject to the Federal Alternative Minimum Tax for some shareholders.
Nuveen funds generally seek to pay stable distributions at rates that reflect each fund's past results and projected future performance. During certain periods, each fund may pay distributions at a rate that may be more or less than the amount of net investment income actually earned by the fund during the period. If a fund cumulatively earned more than it has paid in distributions, it holds the excess in reserve as undistributed net investment income (UNII) as part of the fund's net asset value (NAV). Conversely, if a fund has cumulatively paid distributions in excess of its earnings, the excess constitutes negative UNII that is likewise reflected in the fund's NAV. Each fund will, over time, pay all of its net investment income as distributions to shareholders. The funds' positive or negative UNII balances are disclosed from time to time in their periodic shareholder reports, and are also on www.nuveen.com/cef.
JFP, the Nuveen Tax-Advantaged Floating Rate Fund, has implemented a managed distribution policy which permits it to include as part of its monthly distributions supplemental amounts from sources other than net investment income. This fund currently expects that any supplemental amounts would represent anticipated portfolio price appreciation over time once financial market conditions stabilize and prospects begin to improve for the middle market financial companies in which the fund primarily invests. Because the timing and extent of any such recovery is presently difficult to assess in light of continued market volatility and the negative effects on financial companies of the on-going credit crisis, the fund's latest monthly distribution is estimated to contain only net investment income and does not include any supplemental amounts.
Because a managed distribution program permits regular distributions from sources other than net investment income, it is important to understand the components of a managed distribution and the fund's NAV performance relative to its distribution rate. JFP posts information and estimates on www.nuveen.com/cef regarding the sources of distributions and total return performance over various time periods. In addition, at least in any month in which fund distributions include supplemental amounts from sources other than net investment income, the fund will also send this information directly to shareholders. Estimates are for informational purposes only, and the final determination of the source and tax characteristics of all distributions paid in 2009 will be made in early 2010 and reported to shareholders on Form 1099-DIV at that time.
In addition, distributions for certain funds investing in real estate investment trusts (REITs) may later be characterized as capital gains and/or a return of capital, depending on the character of the dividends reported to each fund after year-end by REIT securities held by each fund. The Nuveen preferred securities funds, JTP, JPS and JHP may invest in REITs; a list of funds that are likely to be affected by re-characterization is posted to www.nuveen.com each January, and updated tax characteristics are posted to the web site and mailed to shareholders via form 1099-DIV during the first quarter of the year.
The following dates apply to today's distribution declarations:
Record Date May 15, 2009
Ex-Dividend Date May 13, 2009
Payable Date June 1, 2009
Monthly Tax-Free Distribution Per Share
Change From
Amount Previous Month
Ticker Closed-End Portfolios
NXP Select Portfolio $.0570 -
NXQ Select Portfolio 2 .0555 -
NXR Select Portfolio 3 .0535 -
NXC CA Select Portfolio .0555 -
NXN NY Select Portfolio .0510 -
Closed-End Funds
Non-Leveraged Funds
NUV Municipal Value .0390 -
NUW Municipal Value 2 .0750 -
NCA CA Municipal Value .0380 -
NNY NY Municipal Value .0355 -
NMI Municipal Income .0445 -
NIM Select Maturities .0350 -
Leveraged Funds
National
NPI Premium Income .0680 .0060
NPP Performance Plus .0680 .0035
NMA Advantage .0715 .0035
NMO Market Opportunity .0690 .0045
NQM Investment Quality .0635 .0010
NQI Insured Quality .0625 .0010
NQS Select Quality .0740 .0070
NQU Quality Income .0685 .0035
NIO Insured Opportunity .0605 .0015
NPF Premier .0630 .0040
NIF Premier Insured .0635 .0035
NPM Premium Income 2 .0690 .0055
NPT Premium Income 4 .0615 .0040
NPX Insured Premium 2 .0595 .0080
NAD Dividend Advantage .0715 .0060
NXZ Dividend Advantage 2 .0730 -
NZF Dividend Advantage 3 .0735 .0055
NVG Insured Dividend Advantage .0645 .0045
NEA Insured Tax-Free Advantage .0620 .0030
NMZ High Income Opportunity Fund .0835 -
NMD High Income Opportunity Fund 2 .0800 -
California
NCP Performance Plus .0655 .0055
NCO Market Opportunity .0675 .0060
NQC Investment Quality .0685 .0065
NVC Select Quality .0710 .0055
NUC Quality Income .0735 .0080
NPC Insured Premium Income .0615 .0010
NCL Insured Premium Income 2 .0650 .0070
NCU Premium Income .0570 .0015
NAC Dividend Advantage .0665 .0035
NVX Dividend Advantage 2 .0695 .0035
NZH Dividend Advantage 3 .0675 .0035
NKL Insured Dividend Advantage .0695 .0060
NKX Insured Tax-Free Advantage .0630 .0040
Florida
NQF Investment Quality .0610 .0020
NUF Quality Income .0550 .0010
NFL Insured Premium Income .0575 .0020
NWF Insured Tax-Free Advantage .0540 .0010
New York
NNP Performance Plus .0645 .0050
NQN Investment Quality .0615 .0055
NVN Select Quality .0595 .0050
NUN Quality Income .0590 .0050
NNF Insured Premium Income .0550 .0045
NAN Dividend Advantage .0635 .0045
NXK Dividend Advantage 2 .0645 .0065
NKO Insured Dividend Advantage .0620 .0070
NRK Insured Tax-Free Advantage .0545 -
Other State Funds
NAZ AZ Premium Income .0540 .0010
NFZ AZ Dividend Advantage .0525 -
NKR AZ Dividend Advantage 2 .0585 -
NXE AZ Dividend Advantage 3 .0545 -
NTC CT Premium Income .0535 .0035
NFC CT Dividend Advantage .0570 .0015
NGK CT Dividend Advantage 2 .0590 .0040
NGO CT Dividend Advantage 3 .0510 .0010
NPG GA Premium Income .0525 .0010
NZX GA Dividend Advantage .0560 .0010
NKG GA Dividend Advantage 2 .0530 -
NMY MD Premium Income .0580 .0020
NFM MD Dividend Advantage .0600 .0015
NZR MD Dividend Advantage 2 .0600 .0015
NWI MD Dividend Advantage 3 .0580 .0045
NMT MA Premium Income .0610 .0055
NMB MA Dividend Advantage .0600 .0020
NGX Insured MA Tax-Free Advantage .0565 .0010
NUM MI Quality Income .0585 .0030
NMP MI Premium Income .0565 .0035
NZW MI Dividend Advantage .0565 .0010
NOM MO Premium Income .0545 -
NQJ NJ Investment Quality .0600 .0055
NNJ NJ Premium Income .0580 .0065
NXJ NJ Dividend Advantage .0590 .0040
NUJ NJ Dividend Advantage 2 .0620 .0045
NNC NC Premium Income .0550 .0045
NRB NC Dividend Advantage .0620 .0020
NNO NC Dividend Advantage 2 .0585 .0020
NII NC Dividend Advantage 3 .0565 .0010
NUO OH Quality Income .0645 .0070
NXI OH Dividend Advantage .0620 .0050
NBJ OH Dividend Advantage 2 .0580 .0035
NVJ OH Dividend Advantage 3 .0635 .0045
NQP PA Investment Quality .0630 .0045
NPY PA Premium Income 2 .0590 .0025
NXM PA Dividend Advantage .0610 .0025
NVY PA Dividend Advantage 2 .0635 .0030
NTX TX Quality Income .0620 .0040
NPV VA Premium Income .0605 .0050
NGB VA Dividend Advantage .0620 .0045
NNB VA Dividend Advantage 2 .0620 .0025
Monthly Taxable Distribution Per Share
Change From
Closed-End Funds: Amount Previous Month
Ticker Taxable Funds
Preferred Securities
JTP Quality Preferred Income Fund .0520 -
JPS Quality Preferred Income Fund 2 .0620 -
JHP Quality Preferred Income Fund 3 .0540 -
Floating Rate: Corporate Loans
NSL Senior Income Fund .0335 -
JFR Floating Rate Income Fund .0410 -
JRO Floating Rate Income Opportunity Fund .0500 -
Floating Rate: Tax Advantaged
JFP Tax-Advantaged Floating Rate Fund .0345* -
* This represents a managed distribution amount. A description of the fund's managed distribution program appears in the text preceding the tables.
Nuveen Investments provides high quality investment services designed to help secure the long-term goals of institutions and high net worth investors as well as the consultants and financial advisors who serve them. Nuveen Investments markets its growing range of specialized investment solutions under the high-quality brands of HydePark, NWQ, Nuveen, Santa Barbara, Symphony, Tradewinds and Winslow Capital. In total, the Company managed $119 billion of assets on December 31, 2008. For more information, please visit the Nuveen Investments website at www.nuveen.com.
Disclosure None
Disclosure None
Could Municipal Bonds Really Default?
When Warren Buffett speaks, it’s usually worth paying attention. This time, the Oracle of Omaha is voicing concerns about the ability of some battered local and state governments to pay off their debts. The idea of cities and states facing insolvency is alarming for sure, and Buffett isn’t alone. Moody’s recently assigned a “negative outlook” to the creditworthiness of all the nation’s local governments. The agency has rarely made such a sweeping generalization but said the magnitude of this recession warranted the move. The comments are the latest to have shaken the once-staid world of municipal bond investing.
Traditionally, muni bonds offered lower yields — usually about 20% less — than Treasury bonds, since their income isn’t taxed. But the group was crushed last year, sending prices down and yields up. Now bargain hunters have started to emerge, attracted by yields that are as much as 70 basis points, or 0.7%, more than similar 10-year Treasurys, for example. As a result, the S&P Muni index has climbed 7% this year, compared with the nearly 6% decline in the broader stock market.
These low prices reflect investor concerns about possible downgrades, says Daniel Solender, director of municipal bond management at Lord Abbett. The Federal Reserve’s buying spree in other areas of the bond market is also depressing yields of Treasury bonds and making municipal bonds all that more attractive. And then there is the $100 billion fiscal stimulus headed toward the states that should help offset the shortfall in tax revenue, says TD Ameritrade Chief Investment Strategist Stephanie Giroux, who adds that historically there has only been a 1% default rate for muni bonds.
“There is some risk, but if you can earn three times buying municipal bonds diversified across the United States and backed by the taxing authority of the states, maybe it’s worth it,” said Gregg Fisher, chief investment officer for advisory firm Gerstein Fisher.
The key is to pick carefully. Here are some tips for bargain-hunters:
• For the most part, it’s worth sticking with so-called general obligation bonds that finance essentials like water and sewers which can be paid back with tax revenue the city or state collects. The recent stimulus spending for health care and education has some pros dabbling with high-quality hospital and university bonds funded by those institutions’ revenue. But it may be worth paying the experts to do the picking or at least sticking with shorter-term options since stimulus spending won’t last forever.
• While most individual investors buy bonds offered by their own state for the extra tax advantage, it pays to diversify nationally by buying bonds of states facing different economic prospects. In other words, don’t invest only in states dealing with, say, a battered real estate market. While Fisher says allowing a state like California to go bankrupt would be akin to throwing it in the ocean, it’s worth protecting against an unlikely default. “In a portfolio of 20 bonds, if one defaults, you only lose at most 5%,” he says.
• Stick with shorter-term durations in general, preferably less than five years. Fisher recommends laddering municipal bonds, buying durations of one to five years, perhaps more maturing sooner if you expect inflation down the line.
• Keep an eye on bond ratings — not just the actual rating but also the trend of the rating to gauge whether the city or state’s health is improving or deteriorating. Check a state or city’s web site to find the sources of income for the bond.
Disclosure I own some muni bond etfs, no individual muni bonds.
Traditionally, muni bonds offered lower yields — usually about 20% less — than Treasury bonds, since their income isn’t taxed. But the group was crushed last year, sending prices down and yields up. Now bargain hunters have started to emerge, attracted by yields that are as much as 70 basis points, or 0.7%, more than similar 10-year Treasurys, for example. As a result, the S&P Muni index has climbed 7% this year, compared with the nearly 6% decline in the broader stock market.
These low prices reflect investor concerns about possible downgrades, says Daniel Solender, director of municipal bond management at Lord Abbett. The Federal Reserve’s buying spree in other areas of the bond market is also depressing yields of Treasury bonds and making municipal bonds all that more attractive. And then there is the $100 billion fiscal stimulus headed toward the states that should help offset the shortfall in tax revenue, says TD Ameritrade Chief Investment Strategist Stephanie Giroux, who adds that historically there has only been a 1% default rate for muni bonds.
“There is some risk, but if you can earn three times buying municipal bonds diversified across the United States and backed by the taxing authority of the states, maybe it’s worth it,” said Gregg Fisher, chief investment officer for advisory firm Gerstein Fisher.
The key is to pick carefully. Here are some tips for bargain-hunters:
• For the most part, it’s worth sticking with so-called general obligation bonds that finance essentials like water and sewers which can be paid back with tax revenue the city or state collects. The recent stimulus spending for health care and education has some pros dabbling with high-quality hospital and university bonds funded by those institutions’ revenue. But it may be worth paying the experts to do the picking or at least sticking with shorter-term options since stimulus spending won’t last forever.
• While most individual investors buy bonds offered by their own state for the extra tax advantage, it pays to diversify nationally by buying bonds of states facing different economic prospects. In other words, don’t invest only in states dealing with, say, a battered real estate market. While Fisher says allowing a state like California to go bankrupt would be akin to throwing it in the ocean, it’s worth protecting against an unlikely default. “In a portfolio of 20 bonds, if one defaults, you only lose at most 5%,” he says.
• Stick with shorter-term durations in general, preferably less than five years. Fisher recommends laddering municipal bonds, buying durations of one to five years, perhaps more maturing sooner if you expect inflation down the line.
• Keep an eye on bond ratings — not just the actual rating but also the trend of the rating to gauge whether the city or state’s health is improving or deteriorating. Check a state or city’s web site to find the sources of income for the bond.
Disclosure I own some muni bond etfs, no individual muni bonds.
Why Treasury Bond ETFs Are Surging
As many investors are wary of what exactly the swine flu is and what affect it will have on stocks, exchange traded funds (ETFs) and the overall global economy, they are fleeing to safe havens.
One such haven that has seen a surge is the Treasury market. The U.S. Treasury Department auctioned $40 billion in 2-year notes on Monday, followed by $35 billion in 5-year notes on Tuesday and $26 billion in 7-year notes on Wednesday, reports Ben Rooney of CNN Money.
This is a whopping $101 billion in Treasuries that are set to sell in one week, in addition to the $57 billion in Treasury bills expected to be sold. To make these numbers even more eye opening, the May refunding will hit next week, where the Treasury expected to sell another $200 billion in Treasury notes and bonds.
To top it all off, some analysts even said that the Treasury would announce plans to launch and offer a 50-year bond, which would be the longest maturity ever issued by the United States, states Deborah Levine of Market Watch. This just a rumor that has been floating around Wall Street and many believe that the Treasury will just sell more of its 30-year bonds.
This is all fine and dandy as long as the demand for U.S. debt remains robust. Some strategists fear that the federal government is going to flood the market with excess supply forcing prices to plummet. Others believe that the Treasury market is in a bubble and as economies recover interest rates will most likely increase causing a burst in the bubble. Short-term Treasury bills are generally one of the safest investment tools, which is why investors scurry to them whenever they’re unsure.
If you want to grab exposure to the bond market, we think that ETFs are the way to go. After all, there are about 15 different ETFs with holdings in U.S. Treasuries.
Disclosure I am long BND and MBG.
One such haven that has seen a surge is the Treasury market. The U.S. Treasury Department auctioned $40 billion in 2-year notes on Monday, followed by $35 billion in 5-year notes on Tuesday and $26 billion in 7-year notes on Wednesday, reports Ben Rooney of CNN Money.
This is a whopping $101 billion in Treasuries that are set to sell in one week, in addition to the $57 billion in Treasury bills expected to be sold. To make these numbers even more eye opening, the May refunding will hit next week, where the Treasury expected to sell another $200 billion in Treasury notes and bonds.
To top it all off, some analysts even said that the Treasury would announce plans to launch and offer a 50-year bond, which would be the longest maturity ever issued by the United States, states Deborah Levine of Market Watch. This just a rumor that has been floating around Wall Street and many believe that the Treasury will just sell more of its 30-year bonds.
This is all fine and dandy as long as the demand for U.S. debt remains robust. Some strategists fear that the federal government is going to flood the market with excess supply forcing prices to plummet. Others believe that the Treasury market is in a bubble and as economies recover interest rates will most likely increase causing a burst in the bubble. Short-term Treasury bills are generally one of the safest investment tools, which is why investors scurry to them whenever they’re unsure.
If you want to grab exposure to the bond market, we think that ETFs are the way to go. After all, there are about 15 different ETFs with holdings in U.S. Treasuries.
Disclosure I am long BND and MBG.
Sunday, May 3, 2009
Main Street Capital Announces Monthly Dividends for April, May and June 2009 of $0.125 Per Share
Confirms Projected Dividend Range of $1.50 to $1.65 Per Share for 2009
Main Street Capital Corporation (Nasdaq: MAIN - News; "Main Street") announced today that its Board of Directors declared monthly dividends of $0.125 per share for April, May and June 2009. These monthly dividends, which will be payable pursuant to the table below, equate to a total of $0.375 per share for the second quarter of 2009. The dividends declared for the second quarter of 2009 represent a 7.1% increase from the dividends per share paid in the second quarter of 2008. The dividends per share for the second quarter of 2009 also equate to an approximate annualized yield of 16.5% based on Main Street's current share price.
Main Street Capital Corporation (Nasdaq: MAIN - News; "Main Street") announced today that its Board of Directors declared monthly dividends of $0.125 per share for April, May and June 2009. These monthly dividends, which will be payable pursuant to the table below, equate to a total of $0.375 per share for the second quarter of 2009. The dividends declared for the second quarter of 2009 represent a 7.1% increase from the dividends per share paid in the second quarter of 2008. The dividends per share for the second quarter of 2009 also equate to an approximate annualized yield of 16.5% based on Main Street's current share price.
Summary of Second Quarter 2009 Monthly Dividends
Declared Ex-Dividend Date Record Date Payment Date Amount Per Share
-------- ---------------- ----------- ------------ ----------------
3/4/09 3/18/09 3/20/09 4/15/09 $0.125
3/4/09 4/17/09 4/21/09 5/15/09 $0.125
3/4/09 5/19/09 5/21/09 6/15/09 $0.125
------
Total for Second Quarter 2009: $0.375
Main Street also confirmed its projected dividend range of $1.50 to $1.65 per share for calendar year 2009. The estimated range for total 2009 dividends was determined based upon projections of 2009 taxable income, anticipated 2009 portfolio activity, and the estimated amount of undistributed 2008 taxable income (or "spillover income") which will be utilized to pay dividends during 2009. Main Street will continue to provide quarterly updates to its 2009 dividend guidance based upon actual 2009 taxable income and portfolio activity.
Disclosure I am long Main shares
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