ETF Expert's Post-Election Bets
12/21/2016 9:00 am EST
Last month, we exited our long-term Treasury bond exposure, as conditions in the space had changed due to rising bond yields (i.e. falling bond prices), explains Doug Fabian, exchange-traded fund specialist and editor of Successful ETF Investing.
That move proved prescient, as bond prices continued to fall in the wake of the election. So we exited just at the right time.
While the rise in bond yields is a negative for long-term Treasuries, it is a likely boom for other income-producing sectors.
One of those sectors is bank loans, and the ETF we’ve chosen to ride that wave is the PowerShares Senior Loan ETF (BKLN). This fund invests in senior loans of banks and other lending institutions.
The fund currently offers a yield of nearly 4.3%, and the best part is that if interest rates continue to rise, that’s a net positive for BKLN, since that fund invests in loans with higher interest rates.
Last month, we also added the iShares Mortgage Real Estate Capped ETF (REM), a fund pegged to the mortgage REIT segment of the income world. The best part of REM for income investors is that you can ring the register monthly with a yield of nearly 10.6%.
Another likely growth sector following the Trump victory is infrastructure. To ride that wave, we selected the First Trust North American Energy Infrastructure Fund (EMLP).
This fund is in the infrastructure business via master limited partnerships in pipeline companies and utilities. With the president-elect vowing to spend $1 trillion on America’s crumbling infrastructure, the holdings in this sector are primed to shine.
Plus, this fund is yielding nearly 4%, which represents an added performance bonus on top of its potential share price appreciation.