This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

3 Reasons to Buy Stock ETFs

NEW YORK ( TheStreet) -- Increasingly, investors have been asking that I put more cash to work. This includes new clients who have been sitting on the sidelines. It also includes current clients who are depositing checks from their banks into their brokerage accounts.

Guarded optimism and restrained greed have returned. It's not the kind of euphoria that, if experience serves, tends to accompany the end of bull markets. Nevertheless, the new-found enthusiasm is coming as global stock assets are hitting two-year highs. In some emerging markets, in fact, prices are logging all-time record peaks.

In this environment, there are those who are hoping for a 5%-10% correction here in November. They're hoping that excessive bullishness and 10 weeks of vertical movement will give them a better "buying opportunity." The problem is they may not get it.

Here are three reasons to buy 2%-3% dips for the ETFs on your Buy List:

1. Treasury yields are much lower than they were seven months ago. When U.S. stocks hit their April 2010 highs, the 10-year Treasury note was near 4.0%. Today, it is near a ridiculously low and historically undesirable 2.5%. Money will continue to leave Treasuries for higher-yielding bonds, preferred shares, partnerships and, yes, stock assets.

The quest for higher yield may begin with ETFs such as Vanguard Dividend Appreciation (VIG) , Vanguard High Yield Dividend (VYM), as well as dividend-based index trackers like WisdomTree Emerging Markets Equity Income (DEM).

2. Price-to-earnings valuations are much better than they were seven months earlier. Consider the simple reality that stocks are at roughly the same place that they were in April. In the seven months that followed -- through a substantive stock correction and an economic soft patch -- corporate growth was vibrant; more than three-quarters of companies beat top-line revenue and bottom-line profit expectations repeatedly.

In other words, the "P" in the price-to-earnings ratio, or P/E, is roughly the same whereas the "E" is much higher, making stocks more attractive on a fundamental basis. This holds true for the Dow Diamond Trust (DIA) with a low 14.5 trailing P/E as well as Claymore Guggenheim Frontier Markets (FRN)with a published 11.0 trailing P/E.

3. The U.S. Government will temporarily extend all of the Bush tax cuts. You can worry that the lame-duck Congress will get nothing done on tax policy -- either because it'll be too difficult for leaders to compromise or because of the complexities involved in a compromise. Yet President Obama is likely to punt the football, agreeing to a simple, temporary extension for two years.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
AAPL $123.25 0.00%
FB $83.30 0.00%
GOOG $548.34 0.00%
TSLA $185.00 0.00%
YHOO $45.10 0.00%


DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs