|Bid||116.20 x 1300|
|Ask||0.00 x 1400|
|Day's Range||118.21 - 118.64|
|52 Week Range||111.25 - 118.64|
|PE Ratio (TTM)||N/A|
|Beta (3Y Monthly)||1.49|
|Expense Ratio (net)||0.15%|
The exchange-traded fund marketplace is littered with a variety of terms and acronyms that have left many investors in want of a user's manual. From time to time, it is worth going back to basics to better understand the ins and outs of ETFs' mechanics to help investors use them to their best advantage. If the fund uses physical replication to track its benchmark (that is, it owns securities, not derivatives), the assets are the component securities (or a sampling thereof) of its benchmark index, any accrued income generated through securities lending, and some cash.
The high-yield bond market posted a 6.4% total return in the first two months of the year. Investors should now favor investment-grade debt, says Martin Fridson.
The new frontier of factor investing is bond exchange-traded funds, but investors should probably wait for more evidence that they work before jumping in.
To say 2018 was an interesting year for fixed income investors is probably an understatement. While some fixed income market observers believe the Fed will slow its pace of rate hikes this year and some believe there will not be any rate increases at all, the new year brings new challenges and opportunities for bond ETF investors.
The Roth IRA is one of the most popular retirement vehicles. While Roth IRAs are funded with post-tax income, the popularity of these products stems from the fact that future withdrawals are not taxed. "Roth IRAs make the most sense if you expect your tax rate to be higher during retirement than your current rate," according to RothIRA.com. "That makes Roth IRAs ideal savings vehicles for young, lower-income workers who won't miss the upfront tax deduction and will benefit from decades of tax-free, compounded growth." Straightforward investments such as individual stocks, bonds, exchange-traded funds (ETFs), index funds and mutual funds are suitable for Roth IRAs, but some asset classes are not conducive to inclusion in Roth IRAs. For example, cash investments like money markets probably should not be included in Roth IRAs nor should funds with high acquired costs and fees. InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Stupidly Cheap Stocks to Buy Now Here are seven of the best ETFs and index funds to consider for Roth IRA inclusion this year. ### Schwab U.S. Dividend Equity ETF (SCHD) Source: Shutterstock Expense Ratio: 0.07% per year, or $7 on a $10,000 investment. Given that Roth IRAs are designed to be long-term investment vehicles, it makes sense that investors add some dividend stocks or funds to their Roth IRA rosters. And knowing that assets in a Roth IRA are bound to be held for lengthy holding periods, saving on ETF or index fund fees is pivotal. Among dividend funds, the Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) is one of the least-expensive options to consider. The $7.60 billion SCHD follows the Dow Jones U.S. Dividend 100-Index, which features domestic dividend payers with minimum dividend increase streaks of 10 years. SCHD holds just over 100 stocks. Dividend growth strategies and funds often feature stocks with quality hallmarks and SCHD is no exception. The fund devotes 43.5% of its weight to consumer staples and technology stocks. Consumer staples has a rich tradition of growing dividends and offering above-average yields while the technology sector has been one of the most prodigious dividend growth groups in recent years. Those traits, among others, make SCHD ideal for inclusion in Roth IRAs. ### Vanguard Value ETF (VTV) Source: Shutterstock Expense Ratio: 0.05% While the value factor struggled mightily over the course of the recent U.S. bull market, historical data suggests value stocks usually perform well, if not outperform over long holding periods. That combined with its low fee make the Vanguard Value ETF (NYSEARCA:VTV) an ideal addition to Roth IRA lineups. VTV is one of the largest and least expensive value ETFs and therefore also one of the largest and cheapest smart beta funds in the U.S. The fund holds 344 domestic stocks with the value designation and it tilts heavily toward large-caps names as highlighted by a median market value of $89.3 billion among its holdings. * 7 Dark Horse Stocks You Really Need to Look at for 2019 While this potential Roth IRA addition is a value fund, many of its holdings qualify as low volatility or quality stocks or both. The possible near-term hindrance to VTV is its 23.5% weight to financial services, but that sector is rallying to start 2019. ### iShares Edge MSCI USA Momentum Factor ETF (MTUM) Expense Ratio: 0.15% Momentum is another investment factor that has impressive long-term returns, but as 2018 showed investors, momentum stocks can be volatile and their fortunes can change abruptly. However, allocating a portion of one's Roth IRA to a momentum fund rather than stock picking among momentum names can smooth out some of volatility associated with momentum fare. Enter the iShares Edge MSCI USA Momentum Factor ETF (BATS:MTUM). The $8.1 billion MTUM "seeks to track the performance of an index that measures the performance of U.S. large- and mid-capitalization stocks exhibiting relatively higher momentum characteristics, before fees and expenses," according to iShares. Investors typically think of momentum strategies as being heavy on technology and consumer discretionary names, and that is the case with MTUM as the fund devotes almost 45% of its weight to those sectors. However, factor-based funds are usually sector agnostic and that is true of this fund. Its sector weights can shift as momentum improves or declines through the various sectors. The fund also devotes over a quarter of its weight to the healthcare sector. ### iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) Expense Ratio: 0.15% Although Roth IRAs are long-term vehicles, even risk-tolerant investors should include some fixed-income exposure. Rather than relying on slower-moving, lower-yielding Treasuries, Roth IRA investors can boost their income profiles with investment-grade corporate bonds. The iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEARCA:LQD) is the largest corporate bond ETF in the U.S. LQD holds nearly 2,000 corporate bonds and has a 30-day SEC yield 4.3%, well above what investors will find with 10-year Treasuries or on the S&P 500. Roth IRA investors can ride out some of the risks associated currently associated with corporate bonds. There is some interest rate risk with LQD, as the fund's duration is 8.27 years. Moreover, roughly half of the fund's holdings are rated BBB, the investment-grade spectrum that is closest to junk territory. That group is also viewed as increasingly vulnerable to credit downgrades. * 7 Retail Stocks to Buy for the Rise of Menswear "Historically, investment-grade corporates with BBB ratings perform relative to other corners of the corporate bond market, but those bonds delivered losses last year, heightening concerns about fragile grasps on investment-grade ratings heading into 2019," according to ETF Trends. ### ProShares Russell 2000 Dividend Growers ETF (SMDV) Expense Ratio: 0.4% As noted earlier, dividends merit strong consideration for Roth IRAs. The same is true of small-cap stocks. The combination of dividends and small caps available via the ProShares Russell 2000 Dividend Growers ETF (BATS:SMDV) is a potentially potent one for Roth IRA investors. SMDV tracks the Russell 2000 Dividend Growers Index, the dividend growth derivative of the famous Russell 2000 Index. SMDV's underlying index requires member firms to have minimum dividend increase streaks of at least a decade. That trait is something of a rarity in the small-cap space and as such, SMDV holds just 61 stocks. However, the fund can help investors mitigate some of the volatility associated with smaller stocks. "According to Harnessing the long-term potential of dividend growth, a new report from FTSE Russell, the Russell 2000 Dividend Growth Index had an annualized return of 11.8% from June 1998 through December 2018, versus 7.6% for the Russell 2000 Index," said FTSE Russell in a recent note. "And these returns were achieved amid a respective annualized volatility of 15.1% and 19.6% for the same period. More return for less risk resulted in a significantly higher return/risk ratio of 0.78 for the Russell 2000 Dividend Growth Index." ### Invesco QQQ (QQQ) Source: Shutterstock Expense Ratio: 0.2% The Invesco QQQ (NASDAQ:QQQ) is ideal for younger Roth IRA investors with the benefits of time and higher risk tolerance. One of the most venerable broad market ETFs in the U.S., QQQ tracks the Nasdaq-100 Index and is known for being a reliable proxy on the technology sector without being a dedicated technology ETF. QQQ devotes almost 42% of its weight to that sector, with Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) combining for 19% of the fund's weight. * 7 Stocks to Buy as the Dollar Weakens For investors looking to add some growth names to their Roth IRAs, QQQ is an efficient way of doing just that, as about 62% of the fund's holdings are classified as growth stocks. ### Invesco S&P 500 Equal Weight ETF (RSP) Source: Shutterstock Expense Ratio: 0.2% Many so-called experts will tell investors only to add prosaic, cap-weighted funds to Roth IRAs. The long-term performance of the Invesco S&P 500 Equal Weight ETF (NYSEARCA:RSP), the largest equal-weight ETF in the U.S., indicates Roth IRA investors could miss out on some impressive returns by solely focusing on cap-weighted strategies. As its name implies, RSP is an equal-weight ETF and none of its 505 holdings command weights of more than 0.25%. Equal-weight strategies often thrive due to exposure to the size or value factors. In RSP's case, it is more a case of the latter because the fund features scant small-cap exposure but does devote over 40% of its weight to value stocks. Since inception and over the past decade, RSP has outperformed the cap-weighted S&P 500, according to issuer data. As on this writing, Todd Shriber does not own any of the aforementioned securities. ### More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Consumer Stocks to Buy for Income * 7 Dark Horse Stocks You Really Need to Look at for 2019 * 7 Retail Stocks to Buy for the Rise of Menswear Compare Brokers The post 7 of the Best Funds to Own in a Roth IRA appeared first on InvestorPlace.
An often discussed topic among corporate bond investors last year was what would become of BBB-rated investment-grade debt in 2019. Bonds with BBB ratings are one to three notches away from junk status and BBB-rated debt accounts for a significant percentage of the U.S. corporate bond market. The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD), the largest investment-grade corporate bond exchange traded fund, devotes about 51 percent of its weight to BBB-rated debt.
As was widely expected, the Federal Reserve recently raised interest rates for the fourth time in 2018. What was a surprise to some market observers was the Fed’s hawkish tone, which indicates multiple rate hikes could be in the offing in 2019. Rising interest rates are not always a negative thing, however, particularly if economic growth and inflation are supportive of those higher borrowing costs.
As experts of financial markets and the economy debate whether there will be a recession next year or later, the chances of that one will come eventually are certain. A recession is defined as two consecutive quarters of negative GDP growth. "Certainly, there's growing risk of recession -- 2019, 2020, going forward," Chief Economist at LendingTree, Tendayi Kapfidze told TheStreet.
U.S. natural gas had a wild ride over the past week as investors were caught off guard by updated weather forecasts as well as reduced stocks. Oil moved in the opposite direction for the better part of the month as glut worries took prices back to October 2017 levels. On the currencies front, the U.S. dollar continues its march against the troubled euro and British pound. Last week has been mostly about the energy sector so leading companies in the field have trended accordingly. Investment grade corporate bonds closed the list as investors reevaluate the risk of placing funds in such assets. Check out our previous Trends edition at Trending: Investors Steer Towards Dividend Yields Amid Market Turmoil.
The year 1983 saw the James Bond movie, "Never Say Never Again," feature Sean Connery for the last time as "Agent 007." Of course, subsequent actors would eventually assume the mantle as the secret service agent, but the movie title serves as a reminder to investors that they should never say never to bonds again, especially after the latest stock market declines. Tuesday's sell-offs, which saw the Dow Jones Industrial Average lose 2.21%, while the Nasdaq Composite shed 1.7% and the S&P 500 declined 1.8%, brought in a flurry of investors to bonds. Much of the blame for the latest declines have been directed towards FANG stocks (Facebook, Amazon, Netflix, Google-Alphabet), which have plundered U.S. equities with a decline of more than 20% from their 52-week highs.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) is not just the largest investment-grade corporate bond exchange traded fund. It is one of the largest fixed income ETFs of any variety. Over its more than 16 years on the market, LQD has played an increasingly important role in helping investors of all stripes gain cost-effective, liquid exposure to a broad basket of high-grade corporate debt.
As the capital markets were in the thick of the extended bull run that peaked in the summer prior to the October sell-offs, high-yield assets saw an influx of investor capital, beating out their higher-rated rivals in investment-grade corporate bonds. After investors got washed through the October volatility cycle, that may have tamped down their risk-on sentiment and this is where Goldman Sachs sees a potential buying opportunity after investment-grade debt fell out of favor during the bull run. With investors hungry for risk, the yields in investment-grade corporate bonds weren't enough to satiate that appetite.
During a volatile October month, traders headed for the entrance to bond exchange-traded funds (ETFs) just as often as they headed for the exits. In particular, trader volume soared the most in the iShares Core US Aggregate Bond ETF (AGG), which saw $2.6 billion in withdrawals or 5% assets under management. Next, the iBoxx $ Invmt Grade Corp Bd ETF (LQD) experienced an outflux of 6% of its assets under management.
Some fixed income exchange traded funds are languishing amid the Federal Reserve's 2018 rate tightening plans, prompting investors to depart some longer-dated, traditional bond ETFs. “Despite growing demand ...
Municipal bonds and related exchange traded funds may not be the most exciting asset category, but they have been holding up relatively well in the fixed-income space. “Muni performance has been nothing ...
The Federal Reserve has hiked interest rates three times this year, prompting some fixed income investors to depart some of the largest bond ETFs. For example, the SPDR Barclays High Yield Bond ETF (JNK) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) are among the top 10 ETFs in terms of year-to-date outflows. The Federal Reserve’s rising interest rates have been a main contributing factor in the downfall of investment-grade bonds this year.