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Looking To Really Diversify? Try 2 ETFs That Invest In Other ETFs

By Investing.com (Tezcan Gecgil/Investing.com )ETFsMay 20, 2021 04:35AM ET
www.investing.com/analysis/looking-to-really-diversify-try-2-etfs-that-invest-in-other-etfs-200581239
Looking To Really Diversify? Try 2 ETFs That Invest In Other ETFs
By Investing.com (Tezcan Gecgil/Investing.com )   |  May 20, 2021 04:35AM ET
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Exchange traded funds (ETFs) offer investors access to a range of asset classes and investment styles. For example, a technology ETF may appeal to investors who wish to invest in technology companies without having to choose specific stocks. They can offer broad exposure to the sector and some diversification.

In order to offer investors additional diversification, some ETFs invest in other ETFs rather than stocks.

As the number of ETFs has grown significantly in the past several years—there are more than 7,600 funds worldwide with about $8 trillion under management—there is a lot of choice. Today was introduce 2 ETFs that invest in other ETFs for added diversification.

1. Global X TargetIncome 5 ETF

Current Price: $24.23
52-Week Range: $21.55 - $25.86
Dividend Yield: 5.01%
Expense Ratio: 0.75% per year

The Global X TargetIncome™ 5 ETF (NYSE:TFIV) invests in other income-producing ETFs. The objective of the fund is to achieve an annualized yield of 5% net of fees. The fund started trading in July 2018 and has $6.6 million in net assets. In other words, it is a young and small fund.

TFIV Weekly
TFIV Weekly

TFIV, which follows the Wilshire Target Income 5% Plus Index, currently invests in six different ETFs:

  • Global X SuperDividend™ US ETF (NYSE:DIV) — (21.11% share), which is up 17.9% YTD with a current dividend yield of 5.95%;
  • Global X SuperDividend™ ETF (NYSE:SDIV) — (20.22% share), which is up 10.4% YTD with a current dividend yield of 6.7%;
  • Global X US Preferred ETF (NYSE:PFFD) — (19.49% share), which is down 1.7% YTD with a current dividend yield of 5.15%;
  • Xtrackers USD High Yield Corporate Bond ETF (NYSE:HYLB) — (19.14% share), which is down 0.7% YTD with a current dividend yield of 4.95%;
  • VanEck Vectors JP Morgan EM Local Currency Bond ETF (NYSE:EMLC) — (14.31% share), EMLC is down 5.1% YTD with a current dividend yield of 4.90%;
  • Global X MLP & Energy Infrastructure ETF (NYSE:MLPX) — (5.73% share), MLPX is up 28.1% YTD with a current dividend yield of 6.41%.

So far this year, TFIV is up more than 3%. We like the diversity of the fund. Passive-income seekers might want to do further due diligence on the ETF.

Readers might be interested to know that there is another similar ETF sponsored by Global X Management – the Global X TargetIncome Plus 2 ETF (NYSE:TFLT). Its aim is to generate an annualized yield in excess of the US 10-year Treasury plus 2%. TFLT currently invests in seven other ETFs.Year to date, the fund is down close to 4%, and the current price supports a dividend yield of 3.1%.

2. iShares Morningstar Multi-Asset Income ETF

Current Price: $23.70
52-Week Range: $21.00 - $24.13
Dividend Yield: 3.80%
Expense Ratio: 0.60% per year

The iShares Morningstar Multi-Asset Income ETF (NYSE:IYLD) gives access to different asset classes, including bonds (60%), equities (20%) and alternative income sources (20%). The fund’s objective is high current income as well as some capital appreciation.

We covered IYLD earlier in the year. However, given the current volatility in equity markets, it might appeal to some investors. Therefore, it might be timely to revisit the fund.

IYLD Weekly
IYLD Weekly

IYLD, which currently has 11 holdings, tracks the Morningstar Multi-Asset High Income Index. Since its inception in April 2012, net assets have reached $240 million.

The fund invests in other iShares ETFs run by BlackRock, which has around 800 ETFs globally and $2 trillion in assets under management.

The top five names in IYLD make up about 73% of the ETF. They are:

  • iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:HYG) — (17.46% share), which is down 0.7% YTD with a current dividend yield of 4.6%;
  • iShares Preferred and Income Securities ETF (NASDAQ:PFF) — (15.17% share), which is down 0.8% YTD with a current dividend yield of 4.7%;
  • iShares 10-20 Year Treasury Bond ETF (NYSE:TLH) — (14.28% share), which is down 11.2% YTD with a current dividend yield of 2.80%;
  • iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) — (14.23% share), which is down 13.2% YTD with a current dividend yield of 1.59%;
  • iShares International Select Dividend ETF (NYSE:IDV) — (11.56% share), which is up 13.2% YTD with a current dividend yield of 4.8%.

Other assets in which IYLD invests include emerging market government bonds, the US mortgage real estate sector, dividend-paying US stocks and emerging market equities.

Since the beginning of the year, IYLD is down 1.6%. Its composition could make it an appropriate fund for parking capital temporarily, while potentially taking advantage of the dividend yield.

Looking To Really Diversify? Try 2 ETFs That Invest In Other ETFs
 

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Looking To Really Diversify? Try 2 ETFs That Invest In Other ETFs

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Comments (5)
Katleho Sepele Sechele
Katleho Sepele Sechele Jun 03, 2021 3:32AM ET
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how do i begin
Ermiyas Wandu
Ermiyas Wandu May 20, 2021 6:03PM ET
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Please sand to many in commercial bank of Ethiopia my account number 10000134789038
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Ad Cline May 20, 2021 2:14PM ET
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reminds me of the buying rage during the last year's of the mega bull market during the late 1920s. investment companies buying investment companies.these investment companies were the for runners to today's mutual funds, hedge funds and etfs.. most of them went belly up during the 1929-1930 stock market crash. this buying frenzy signaled a major top. speculation, leverage, high valuations, as in todays markets, were the serious problems that brought them down.
Dorian Roberts
Dorian Roberts May 20, 2021 11:46AM ET
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I like the information and new investment options, will look up the ETFs and determine if they are investing options for me. Thank you 💼
Gene Kret
Gene Kret May 20, 2021 10:48AM ET
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TSLA Buy !!!!
 
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