Unique Yield ETFs to Keep Skin in the Game
NEW YORK (TheStreet) -- As China struggles to stick to its growth trajectory and fears of Europe's sovereign debt crisis make their way back into the picture, investors are likely beginning to question the longevity of the market's early-year rally. This recent bout of turmoil may persist in the coming weeks and lead some to embrace the, "sell in May and go away" mantra, but I feel that exiting the market at this time is not the best idea.
Rather, as turbulence persists, investors may want to consider revisiting some overlooked or unique yield-focused exchange traded products.
However, dividend ETFs like the iShares Dow Jones Select Dividend Index Fund (DVY) and the Vanguard Dividend Achievers ETF (VIG) have managed to stay in positive territory on a year-to-date basis. As the more aggressively structured of the two, the VIG has been the clear leader, returning more than 5.5% during this period. DVY's year-to-date performance fails to break the 4% barrier.
Either VIG or DVY are worth considering in the event that the clouds continue to gather over the global macroeconomic landscape. However, those who feel that any upheaval will be short-lived, and will ultimately pave the way to another steep leg higher, may want to direct their attention toward the Vanguard-branded option. With some of the largest slices of its portfolio dedicated to industrials and energy, the fund is well-suited for bullish market conditions.
While funds like DVY and VIG may satisfy a fearful investor's appetite for equities, high-yielding options like dollar-denominated emerging market bonds may offer an attractive mix of risk and safety for fixed income-hungry individuals, or those looking to adjust their developed market exposure.
In addition to allowing investors to target their favorite emerging nations without having to venture into equity markets, the risks of these debt instruments are further offset thanks to the fact that they are backed by the U.S. dollar. This is a welcomed relief for those who may be wary of the challenges associated with developing currencies.
In the past, investors have turned to sovereign debt-tracking funds like the iShares JPMorgan USD Emerging Market Bond ETF (EMB) and the PowerShares Emerging Markets Sovereign Debt Portfolio (PCY) to get their fill of dollar-denominated, emerging market debt. However, in recent months, this pool of funds has expanded and evolved.