What You May Have Missed This Week...
Figuring out what's happening with SCHD, fixed income ETFs with 20% yields and two types of ETFs to avoid.
In addition to the regular posts here on Substack, I also publish ETF research and notes over on my blog, ETF Focus.
In case you wanted to catch up on the latest research above and beyond what you’re reading here, this is a quick list of some of the most recent articles from the blog!
SCHD: Why 2023 Has Been So Miserable For This Elite Dividend ETF & How It Can Make Its Comeback
Even the best ETFs can have their struggles. For SCHD, that's unquestionably been this year. Part of the poor performance is understandable. 2023 has been all about mega-caps, tech and the FAAMG stocks. Investors are bidding up riskier assets on the belief that the economy is in good shape and will be yet for a while longer. That's put more defensive asset classes, such as dividend payers on the back burner.
Two Covered Call ETFs I Like Better Than QYLD
Investing in exchange-traded funds (ETFs) that utilize a covered call strategy can be an appealing choice for many investors. The allure lies in their potential to generate additional income through the premiums earned by selling call options, offering a steady income stream on top of dividends. A classic example of such an ETF is the Global X NASDAQ 100 Covered Call ETF (QYLD), which currently stands as Global X ETFs' largest fund in terms of assets under management and has become a poster child of sorts for the covered call ETF industry. Yet, despite its popularity and widespread recognition, QYLD is not the only player in this field. Nor is it necessarily the best option for every investor.
Income Strategy: Fixed Income Buy-Write ETFs From iShares Yielding 20%
Any investment product that quotes a yield of 10% or higher should be met with immediate skepticism. To capture a yield that high, the fund is usually either very risky or the yield itself is unsustainable. There are some significant risks and tradeoffs that come with reaching for yield. You can imagine my reaction then when iShares announced the launch of its covered call bond ETF lineup. Structurally, these are set up very similarly to QYLD in that they essentially use a broad, familiar index as its underlying security with an option writing strategy laid over the top. The big difference this time is that it's using bonds instead of stocks.
Is It Worth Searching For Yield Beyond 5% Treasury Bills?
For all the pain that the 2022 bear market and the Fed’s aggressive rate hiking cycle caused, there is a silver lining. Investors have ample opportunities to capture some juicy yields. Gone are the days of 0% yields on savings accounts, money markets and Treasury bills (well, I suppose savings accounts still have them). Now, income seekers can buy a simple Treasury bill and get a yield of 5% or more. But the landscape has gotten more complicated.
Two ETFs I Would Pair with SCHD as a Dividend Investor
As a dividend investor, you may already be familiar with, or perhaps even own shares of, the Schwab U.S. Dividend Equity ETF (SCHD). Boasting a robust underlying index, competitively low fees, and a history of strong performance, SCHD has undoubtedly made its mark in the dividend investing world. Yet, as solid as this ETF may be, it's not without its limitations, chief among them being its predominantly large-cap value focus. In fact, SCHD's portfolio consists almost entirely of 100 large-cap value stocks, thereby leaving other market segments underrepresented.
Two Types of ETFs I Like Best for Beginner Dividend Investors (and Two I Would Avoid)
Investing is a journey, and every journey begins with a single step. For those setting out on the path of dividend investing, the array of options can be overwhelming, and certain aspects can be more seductive than others. High yields and the promise of monthly payouts often catch the eye of novice investors, pulling them in like a siren's song. However, as attractive as these features may be, they're not always indicative of a wise long-term investment.
Two Lesser-Known Dividend ETFs That Deserve More Attention
The dividend investing world often buzzes with talk of the Schwab U.S. Dividend Equity ETF (SCHD), a stalwart in the realm of dividend-focused ETFs. I've penned numerous articles about SCHD myself, praising its impressive balance of yield and growth. But let's face it, continually exploring the same investment avenues can lead to a sense of monotony, complacency, and stagnation. In a niche brimming with options, it's easy for some dividend ETFs to go unnoticed and unloved. In my opinion, there are always fresh opportunities lying off the beaten path.
Backtesting 3 Dividend Income ETF Portfolio Ideas: The Good, The Bad & The Ugly
Every investor dreams of a foolproof strategy for consistent returns, and while such a strategy may not exist, there are tools and techniques that can help us make more informed decisions. One of these tools is backtesting. Backtesting involves applying a particular investment strategy to historical data to see how it would have performed. It can help us understand the effectiveness of certain approaches, providing valuable insights to shape future investment decisions.