Summer is here and the market is facing a possible consolidation period with increased volatility. Investors are probably considering new options for their portfolios. Fortunately, there are a number of ETFs that look well positioned to take advantage of the trends in the market, and become key components during this uncertain time.
Bank Loan ETFs
In order to protect from higher interest rates, while still obtaining decent yields, investors have been flocking to bank loan ETFs. Bank loan ETFs provides a combination of current income and floating rates which will prove to be the best investment strategy whenever interest rates rise. (3 Excellent ETFs for Income Investors)
In this context, PowerShares Senior Loan Portfolio (BKLN) has turned out to be one of the best selling ETF so far this year. BKLN could prove to be the right choice for investors looking for floating rate bonds to protect against rising interest rates by taking higher credit risks.
BKLN has so far attracted $4.5 billion asset under management. Apparently, the fund has been able to more than double its asset base this year which also signifies how popular bank loans ETFs have been in 2013.
BKLN trades at volume levels of more than 4 million shares a day and charges investors 66 basis points in fee. The distribution yield provided by the fund is quite impressive at 4.56%. (3 High Yield ETFs for Your IRA)
This relatively new ETF focuses on the senior loan market, which is a subset of the junk bond world. However, bonds in this category are ‘senior’ to other types of debt, while they also use LIBOR for their yields.
Investors usually look for fixed-rate bonds for inclusion in their product portfolio. However, it should be noted that fixed-rate bonds faces the risk of rising interest rates. In order to curtail this risk, investors can include bank loan ETFs in their portfolio.
Dividend ETF with Apple Exposure
Although Apple reported March quarter results mostly in line with expectation; the most notable factor in the announcement was an attempt to unlock shareholder value. (ETFs to Watch After Apple Earnings)
The company raised its limit for share buy back from $10 billion to $60 billion and increased its dividend 15% to $3.05/shares. This made the company the highest dividend payer in U.S. in cash terms.
In order to take advantage of this increase in dividend by the company, investors have very few choices in their radar. Dividend ETFs like Vanguard Dividend Appreciation ETF (VIG) and the SPDR S&P Dividend ETF (SDY) although are quality ETF option in the space but they does not have Apple in their portfolio.
So in order to take advantage of this increase in dividend by the tech giant, investors should look to invest in First Trust NASDAQ Technology Dividend Index Fund (TDIV).
TDIV focuses on technology companies that pay out dividends. The fact that most dividend-heavy portfolios are extremely light on technology firms suggests that this could be an interesting complement to many portfolios.
This recently launched fund has $148.1 million asset under management and appears to be least popular choice among investors as indicated by its trading volume of 38,500 shares a day.
Apple occupies the fifth position in the fund and accounts for 7.2% of the asset base of the fund. The fund has a 30-Day SEC Yield of 2.69%. The fund charges a fee of 50 basis points. Among other individual holdings, Intel, Microsoft and Cisco enjoy the first three positions in the fund. (Buy these 3 ETFs for Execllent Dividend Growth)
Spin Profits with Spin-Off ETF
Research shows that spun-off entities generally outperform their parents. One of the reasons could be that investors prefer focused smaller focused companies compared with bigger diversified ones. (Read: Forget dividends, focus on buybacks)
It is no surprise that this little known ETF--Guggenheim Spin-Off ETF (CSD)--that includes spun-off companies has been outperforming the broader market.
The product currently holds 27 securities in its basket, with an average market cap of just $5.9 million.
The top holdings are Exelis Inc., Lumos Networks snd WPX Energy. In terms of sector allocations, Energy (23.4%), Industrials (20.9%) and Consumer Discretionary (20.4%) occupy the top three spots.
The product charges an expense ratio of 60 basis points annually. However investors should not that the volume is pretty light—just about 5,000 shares per day, which may result in wider bid-ask spreads.
CSD has outperformed the broader market significantly, with a 91% return over the past three years and 24% return year-to-date, versus 56% and 12% respectively for SPY.
Despite outperformance, the fund has not been very popular with investors and has managed to attract only $191 million is assets so far.
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