NEW YORK (TheStreet) -- Why are investors still buying Treasuries and short-term investment grade bonds? Many have grown accustomed to the exceptional total returns.
As I look out across the 2013 landscape, however, I see less opportunity for investors to score big with a capital appreciation component on taxable U.S. debt or quality (e.g., AAA, AA, etc.) corporate debt. Depending on the bond duration, 1%-4% yields represent the total gain that one should expect here.
Of course, President Obama's reelection has secured the current
mandate for a 0% interest rate target. High-yield corporates, preferred shares and convertibles with their 5%-7% yields should work just fine in our muddle-through economy.
These popular asset types are unlikely to see additional capital appreciation, though. More impressive total returns may need to come from another source.
Here are three ETF areas with enhanced total return potential in 2013:
1. Foreign REIT ETFs.
While yields on domestic real estate investment trusts are better than comparable 10-year Treasuries, the 3.4% yield on
is about the same as the yield for
First Trust Morningstar Dividend Leader
. Yet, the latter offers much greater total return potential.
On the other hand, REIT distributions have never been part of the beneficial tax rates on dividends. This implies that REIT yields may soon be on a level playing field with dividend stocks. If so,
SPDR DJ International Real Estate
, currently offering 3.8%, may have the power to lure investors over for the payout. Meanwhile, new investors would bolster the price that contributes to a handsome total return.
2. Timber ETFs.
Homebuilder ETFs rocketed in 2012 based on the underlying belief that a housing recovery is sustainable. Yet, after a remarkable price run-up, homebuilder ETFs may have a lot less to offer for total return hunters. High dividends? You won't find them in this volatile sector.
Nevertheless, companies that own/lease forested property for sale of lumber and other wood-based products may be a means for total return seekers to capitalize on a real estate renaissance. REITs like
Plum Creek Timber
and forest product manufacturer
can be found in the list of holdings for
Guggenheim Global Timber
as well as
iShares Global Timber and Forestry
3.) Singapore ETFs.
Singapore Telecom provides mobile services to nearly a half billion people in the Asia Pacific region. The company has a 10% weighting in
iShares MSCI Singapore
, helping to bolster the dividend yield to 3.6%. What's more, with Singapore rapidly become the center of the Asian financial universe, there are few places with as much "Street" credibility. Note: More adventurous souls might look to
iShares Singapore Small Cap
Hesitant to revisit the
Asia growth story? You shouldn't be. Not only is China's economy stabilizing, but Singapore boasts full employment (1.9% unemployed) as well as an enviable budget surplus that is 16.4% of GDP.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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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