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4 ETFs for MLP Exposure

2. Attractive Yield Spread. The ALPS Alerian MLP ETF (AMLP) currently boasts a 6.2% annualized yield. The historical spread between 10-year Treasuries is currently 400 basis points, when it might normally be closer to 250 basis points; the yield spread between AMLP and the iShares 20+ Year Treasury (TLT) is also wider than the historical average. Topping it off, AMLP has genuine potential for capital appreciation, whereas individual Treasury bond debt matures and is currently priced near record lows.

3. Low Correlation With Other High Yield Instruments. In a play-by-play financial crisis (e.g., subprime 2008, sovereign debt 2011), virtually all risk assets move together. The most troubling aspect of the "risk on-risk-off" phenomenon is the difficulty in diversifying one's portfolio with low-correlating assets.

That said, the JP Morgan Alerian MLP ETN (AMJ) has very slight negative correlations with a number of high-yielding investments. The one-year correlation coefficients with SPDR Select Utilities (XLU) and iShares JP Morgan Emerging Market Bond (EMB) are -.09 and -.30 respectively.

Disclosure Statement: ETF Expert is a website that makes the world of ETFs easier to understand. Gary Gordon, Pacific Park Financial and/or its clients may hold positions in ETFs, mutual funds and investment assets mentioned. The commentary does not constitute individualized investment advice. The opinions offered are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial or its subsidiaries for advertising at the ETF Expert website. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert at the site.
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AMJ $22.55 0.00%
AMLP $8.99 0.00%
MLPN $13.93 0.00%
MLP $5.21 0.00%
SPY $185.42 0.00%


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