4 ETFs for a 7% Yield Portfolio

davfor

NUSI, JEPI, HNDL, HIPS

When you consider them together as part of a single investment collectively, ... you'll find a relatively diversified portfolio that consists of large-cap stocks, some international exposure, a mix of investment-grade and high yield corporate and government bonds and a splash of alternative investments to diversify overall risk while providing a yield boost.

7% Yield ETFs

wxman123

Really like HNDL, the others meh except for HIPS which is a train wreck.

AZRph

Another high yield ETF I reviewed was VPC, a newer private credit fund with good performance but an expense ratio of 5.53%! The base direct ER is 0.75%, while the remainder is attributed to AFFE (Acquired Fund Fees and Expenses). Granted it is a fund of funds with components layering on additional expense, but still seems extreme to me. Perhaps readers with more background in this investment class can provide further embellishment and evaluation. Thank you.

wxman123

AZRph said:

Another high yield ETF I reviewed was VPC, a newer private credit fund with good performance but an expense ratio of 5.53%! The base direct ER is 0.75%, while the remainder is attributed to AFFE (Acquired Fund Fees and Expenses). Granted it is a fund of funds with components layering on additional expense, but still seems extreme to me. Perhaps readers with more background in this investment class can provide further embellishment and evaluation. Thank you.

Leveraged loans and BDC's, stay far, far away IMHO. If you want to play around in a similar space MPV is a relative bargain these days.

rforno

I'm stalking DIVO myself.....

davidrmoran

wxman123 said:

Really like HNDL, the others meh except for HIPS which is a train wreck.

Man, what does this tell you? :

HNDL, which is a fund-of-funds, has a target distribution strategy that you often find in the closed-end fund universe.

... On the downside, the fund's distribution is dependent upon the performance of the fund. If the share price goes down, your dividend also goes down.

... The fixed distribution strategy is the unique feature and must be watched closely because it has the potential to be good or bad. Because it aims to distribute an annualized rate of 7% of assets, HNDL needs to generate that type of total return in order for it to "stay above water".

The fund will, of course, distribute any income that is generated, but any shortfall from the 7% target needs to be made up by the fund's net assets. That could include capital gains generated by the fund or what's considered a "return of capital", which is essentially returning the investor's initial investment. ...

Mark

@waxman who said "Leveraged loans and BDC's, stay far, far away IMHO." Would you care to elaborate?

wxman123

Mark said:

@waxman who said "Leveraged loans and BDC's, stay far, far away IMHO." Would you care to elaborate?

Sure, these are very volatile beasts that can be traded but are not good long term investments, in my opinion. Since 2013 BIZD (an etf that holds BDC's) has a sharpe ratio of .40 with a max DD of 44.53%. In the leveraged loan department it depends on the issue, but a popular CEF like OXLC had an over 60% drawdown over that same period. As for HNDL, like most anything else, it needs to be watched but the ETF has a good strategy in terms of stability while looking for opportunity and has done well in its short life. As someone who has traded CEFs for many years I'm looking to HNDL as more of a longer term holding to provide cash flow. Not many great options these days.

Mark

@waxman - although you chose some of the most derelict examples to make your point I do appreciate the courtesy of your response. Those two are also flaming red flags for anyone with less knowledge of what they might be getting into and/or are chasing yields need to understand what they are or might be stepping in.