Yesterday, I provided a pillow for those of you who worry about a summertime selloff in stock assets. We talked about several ETFs that may limit the potentially damaging effect of a Fed that won’t lower interest rates in 2007.
The ETFs discussed… the PowerShares DB G10 Currency Harvest (DBV) and the S&P 500 Covered Call Fund Inc. (BEP)… both show a low correlation to domestic stocks. The first profits from the differences between high-yielding currencies and low-yielding currencies around the world. The second generates income at all times, while showing the potential for appreciation in slumping or sideways markets.
With more data supporting the Fed’s view on inflation risks, people are asking whether there are additional "comfort foods" in the ETF refrigerator. Indeed there are.
The Alpine Global Dynamic Dividend Fund (AGD) employs a unique strategy for capturing dividends. Most companies payout dividends on a quarterly basis, yet AGD serves up monthly distributions that amount to an annual yield of roughly 8%. The income is rather strong in a sideways or slumping market. And still, there is the potential for capital appreciation as well.
Like the investments mentioned earlier (BEP and DBV), the Alpine Global Dynamic Dividend Fund (AGD) shows a low correlation to the S&P 500 broad market benchmark, as well as lower risk than the S&P 500 as measured by volatility (beta).
The Advent Claymore Convertible Securities & Income Fund (AVK). A convertible bond fund has the potential to do well in markets that get rattled by interest rates. That’s because convertible bonds can convert to common stock at an advantageous time. Like AGD, AVK distributes dividends on a monthly basis with an annual yield that approximates 8%. And similar to the global dividend fund mentioned previously, one also may garner capital appreciation.
Disclosure Statement: As a Registered Investment Advisor, Pacific Park Financial, Inc. may hold positions in the ETFs, mutual funds and/or index funds mentioned above.