ETFs To Invest In With Good As Well As Safe Returns

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Mar 05, 2015

An ETF (Exchange Traded Fund) is considered a better choice of investment than stocks because the former invests in a group of stocks so that you can distribute your risk in a more efficient way. However whether it is an ETF or stock, if it yields a good dividend, you cannot feel fully happy about it. There is a certain element of inhibition that comes along with you, when you consider these high-yielding choices for investment purposes. High yields mostly go hand in hand with high risks. Not always, though. The following ETFs provide you more than 8% yield and the best part about them is that these are safe yields. You can be assured of your money’s worth here.

Making optimum use of the telecom sector

The telecom sector is known for two important factors – capacity to pay out of dividends and stability of operations as they are government-regulated. Considering these factors, you can gain a lot if you invest in iShares Global Telecom ETF (IXP, Financial). The best part of this ETF is that it invests in 32 telecom companies – companies that are big and have a huge brand name for themselves. This way, they combine the benefits of all these companies and pay out handsome returns to investors. Most of the companies in which this ETF has invested in, are run by the government; hence you can be assured of stable returns on your investment. Currently, the dividend yield of this ETF is 12.3%, which is a remarkable rate indeed. Some of the companies that this fund invests in are big names like AT&T (T, Financial), Telefonica SA (TEF, Financial), Deutsche Telekom AG (DTEGY, Financial) and China Mobile Hong Kong (CHL, Financial). Share price trend of the fund for the last few months is seen below:

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Making hay while low interest rates persist

The next ETF that we are going to see requires cautious dealing from investors. It invests in real estate investment trusts and business development companies – 38 of them in total. It is the Power Shares KBW High Dividend Yield Financial ETF (KBWD, Financial). At present, the dividend yield of this fund is 8.33%. The rates will continue to pleasantly surprise as long as the mortgage rates are low. Once the Federal Reserve increases these rates, profit margins of these REITs and BDCs will come down, thereby bringing down the overall performance of the fund. Hence if you want to make the most of your investment when rates are low, this fund is the best. The movement of prices of this fund for few months in the past is seen below:

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The best thing about this ETF is it invests in a diversified group of stocks that are picked up from the insurance, financial and banking sectors. Hence you will be hugely benefitted by the growth in these. However, you should be shrewd enough to take out your stakes from this fund once you see an increase in interest rates. Around 68% of its investments are held in small cap stocks, 20% are held in mid cap stocks and close to 2% are held in large cap stocks. Some of the big names in which this fund invests in are Medley Capital Corp (MCC, Financial), Triangle Capital Corp (TCAP, Financial), Invesco Mortgage Capital Corp (IVR, Financial), Areas Capital Corp (ARCC, Financial), etc.

Conclusion

Investors who are looking for stability of their investments and continuity in their dividend yields should choose the above mentioned ETFs. With the best stocks under its belt, these ETFs are poised for a good year ahead. With the current volatile nature of stock market, these stocks will not only provide you a great cover against risks, but will also add value to your hard-earned money.