Regardless of where one stands on the macro-economic picture, it's difficult to believe that investors would dump corporate credit out with the bath water. The micro-economic picture is vastly improved since the 2008 banking collapse.
It follows that, in spite of pending uncertainties related to Greece, Spain and "Taxmageddon," I would give strong consideration to these three ETFs:
1. Vanguard Long-Term Corporate Bond ETF (VCLT).
Vanguard keeps the expenses very low (0.14%) on this exchange-traded, fixed-income vehicle. VCLT tracks the Barclays 10+ Year Corporate Bond Index, holding roughly 860+ individual bonds with an average maturity of 13 1/2 years.Recent capital appreciation has sent the annualized yield of approximately 4.4% down from 4.7% a few months back. That said, the reliable monthly payout and the potential for additional price appreciation in the "Grexit" fear-filled days of September make VCLT worthy of buying on the dips.
2. WisdomTree Emerging Market Corporate Bond (EMCB). Until recently, investors only had access to sovereign emerging-market bonds. Moreover, one of my largest holdings across client portfolios is PowerShares Emerging Market Sovereign Debt (PCY) due to the exceptionally low debt-to-GDP ratios across the developing world. Still, the same demographics, fundamentals and growth rates that we associate with emerging-market stock assets should be an even bigger bang for emerging-market corporate bond assets. EMCB is expensive (0.60%), yet the dollar-denominated investment sports an attractive 5.0% distribution yield.
3. Market Vectors Preferred Securities excluding Financials (PFXF). I remain an advocate for the highly liquid iShares Preferred Fund (PFF). That said, I recognize the extreme volatility and uncertainty associated with financial institutions since the banking collapse in 2008. With up to 75% of all preferred shares eminating from financial companies, this recent introduction by the Van Eck Market Vectors team is conceptually refreshing; that is, you may still pursue the historically higher yields associated with corporate preferred securities over those corporations' traditional bonds, while simultaneously eliminating the excessive volatility of the financial sector. The net expense ratio (.40%) is reasonable for an asset that should serve up monthly distributions at an annualized yield of 6%-6.25%.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage. 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.
Gary Gordon reads: Real Clear Markets
On Twitter, Gary Gordon follows: Jonathan Hoenig
Hard Assets Investor
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts