Looking To Really Diversify? Try 2 ETFs That Invest In Other ETFs
Investing.com | May 20, 2021 04:35AM ET
Exchange traded funds (ETFs) offer investors access to a range of asset classes and investment styles. For example, a technology ETF may appeal to investors who wish to invest in technology companies without having to choose specific stocks. They can offer broad exposure to the sector and some diversification.
In order to offer investors additional diversification, some ETFs invest in other ETFs rather than stocks.
As the number of ETFs has grown significantly in the past several years—there are more than 7,600 funds worldwide with about $8 trillion under management—there is a lot of choice. Today was introduce 2 ETFs that invest in other ETFs for added diversification.
h2 1. Global X TargetIncome 5 ETF/h2Current Price: $24.23
52-Week Range: $21.55 - $25.86
Dividend Yield: 5.01%
Expense Ratio: 0.75% per year
The Global X TargetIncome™ 5 ETF (NYSE:TFIV) invests in other income-producing ETFs. The objective of the fund is to achieve an annualized yield of 5% net of fees. The fund started trading in July 2018 and has $6.6 million in net assets. In other words, it is a young and small fund.
TFIV, which follows the Wilshire Target Income 5% Plus Index, currently invests in six different ETFs:
- Global X SuperDividend™ US ETF (NYSE:DIV) — (21.11% share), which is up 17.9% YTD with a current dividend yield of 5.95%;
- Global X SuperDividend™ ETF (NYSE:SDIV) — (20.22% share), which is up 10.4% YTD with a current dividend yield of 6.7%;
- Global X US Preferred ETF (NYSE:PFFD) — (19.49% share), which is down 1.7% YTD with a current dividend yield of 5.15%;
- Xtrackers USD High Yield Corporate Bond ETF (NYSE:HYLB) — (19.14% share), which is down 0.7% YTD with a current dividend yield of 4.95%;
- VanEck Vectors JP Morgan EM Local Currency Bond ETF (NYSE:EMLC) — (14.31% share), EMLC is down 5.1% YTD with a current dividend yield of 4.90%;
- Global X MLP & Energy Infrastructure ETF (NYSE:MLPX) — (5.73% share), MLPX is up 28.1% YTD with a current dividend yield of 6.41%.
So far this year, TFIV is up more than 3%. We like the diversity of the fund. Passive-income seekers might want to do further due diligence on the ETF.
Get The News You Want
Readers might be interested to know that there is another similar ETF sponsored by Global X Management – the Global X TargetIncome Plus 2 ETF (NYSE:TFLT). Its aim is to generate an annualized yield in excess of the US 10-year Treasury plus 2%. TFLT currently invests in seven other ETFs.Year to date, the fund is down close to 4%, and the current price supports a dividend yield of 3.1%.
h2 2. iShares Morningstar Multi-Asset Income ETF/h2Current Price: $23.70
52-Week Range: $21.00 - $24.13
Dividend Yield: 3.80%
Expense Ratio: 0.60% per year
The iShares Morningstar Multi-Asset Income ETF (NYSE:IYLD) gives access to different asset classes, including bonds (60%), equities (20%) and alternative income sources (20%). The fund’s objective is high current income as well as some capital appreciation.
We covered IYLD earlier in the year. However, given the current volatility in equity markets, it might appeal to some investors. Therefore, it might be timely to revisit the fund.
IYLD, which currently has 11 holdings, tracks the Morningstar Multi-Asset High Income Index. Since its inception in April 2012, net assets have reached $240 million.
The fund invests in other iShares ETFs run by BlackRock, which has around 800 ETFs globally and $2 trillion in assets under management.
The top five names in IYLD make up about 73% of the ETF. They are:
- iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:HYG) — (17.46% share), which is down 0.7% YTD with a current dividend yield of 4.6%;
- iShares Preferred and Income Securities ETF (NASDAQ:PFF) — (15.17% share), which is down 0.8% YTD with a current dividend yield of 4.7%;
- iShares 10-20 Year Treasury Bond ETF (NYSE:TLH) — (14.28% share), which is down 11.2% YTD with a current dividend yield of 2.80%;
- iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) — (14.23% share), which is down 13.2% YTD with a current dividend yield of 1.59%;
- iShares International Select Dividend ETF (NYSE:IDV) — (11.56% share), which is up 13.2% YTD with a current dividend yield of 4.8%.
Other assets in which IYLD invests include emerging market government bonds, the US mortgage real estate sector, dividend-paying US stocks and emerging market equities.
Since the beginning of the year, IYLD is down 1.6%. Its composition could make it an appropriate fund for parking capital temporarily, while potentially taking advantage of the dividend yield.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.