The Best ETFs for Income Investors

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

First off, I hope you had a fantastic Thanksgiving celebration! I love this holiday, and I hope it was good for you and your family and friends.

We have a lot to be thankful for in America. Despite the downbeat headlines around the world lately, we always must remember that we enjoy a standard of living greater than any time in human history. For that blessing, I am thankful.

I am also immensely thankful to you, the Weekly ETF Report reader, to subscribers to my Successful ETF Investing newsletter and to clients of my money management firm, Fabian Wealth Strategies. Without you, what we do here wouldn’t be possible.

Now, recall that last week we covered what I called the best exchange-traded fund (ETF) ideas for 2016, particularly if you are a growth investor.

Today, it’s all about the best ETF ideas for income. But first, let me give a quick review of the growth names we covered last week.

Here’s my list of the five best ETF ideas for growth investors in 2016. Some of these we currently own in the Successful ETF Investing newsletter, and some are just on our radar.

1) Health Care Select Sector SPDR Fund (XLV). Healthcare is an industry that continues benefitting from demographics, innovation, mergers and acquisitions (M&A) and insurance mandates. XLV is the ETF that holds the biggest and best healthcare stocks around.

2) First Trust Dorsey Wright Focus 5 ETF (FV). This is a “fund of funds” that simultaneously holds other funds that have allocations to top-performing sectors. Biotech, Internet, consumer staples, consumer discretionary and healthcare all are part of this fund.

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3) PureFunds ISE Cyber Security ETF (HACK). This is the cybersecurity stock ETF, one that we’ve written about extensively in this publication, as well as in the Successful ETF Investing newsletter. We also recently conducted a FREE webinar on HACK, which I encourage you to check out before you start making investment decisions in 2016.

4) iShares India 50 ETF (INDY). India is a country that has a pro-capitalist political climate, a huge amount of human capital and citizens hungry for economic growth and an enhanced living standard. INDY is a way to get exposure to the companies benefitting most from these trends.

5) WisdomTree Japan Hedged Equity Fund (DXJ). Japan continues to put the pedal to the metal on “Abenomics,” which means more quantitative easing from the Bank of Japan and likely more upside for Japanese stocks. And, with DXJ’s hedge component, you get that performance without the negative influence of any currency disparities.

When it comes to growth in 2016, these are the funds I think represent great ideas going forward.

As for income ETFs, there is no shortage of great ideas as we enter 2016. The elephant in the room of a likely rate hike by the Federal Reserve in December will dominate the income landscape, but it won’t alter the picture when it comes to ways to generate yield from your assets.

Here are my five best ETF ideas for 2016 if your primary goal is generating income.

1) SPDR DoubleLine Total Return Tactical ETF (TOTL). This bond fund is actively managed by the “New Bond King,” Jeffrey Gundlach of DoubleLine Capital, and it takes advantage of the best bonds in the market. The fund invests across global fixed-income sectors with an eye toward shorter-duration bonds.

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2) iShares US Preferred Stock (PFF). This fund gives you exposure to the best preferred stocks in the market. These hybrid securities are sort of like stocks and sort of like bonds, as they tend to move higher with the equity markets while also delivering strong yields.


3) PowerShares CEF Income Composite ETF (PCEF). This ETF “fund of funds” gives you exposure to the closed-end fund market. That market consistently has delivered outstanding yields for income-oriented investors.

4) iShares US Real Estate ETF (IYR). Real estate investment trusts (REITs) are a fantastic tool for generating yield. In this fund of funds, you get broad-based exposure to the best REITs operating in the market today.

5) iShares Select Dividend ETF (DVY). This is the best ETF for exposure to the biggest and arguably the best dividend-paying stocks in the market today. DVY gives you a very solid yield along with the upside potential of the broader equity markets.

If you want more ideas, including which funds we’re buying right now, then I invite you to check out my Successful ETF Investing newsletter today!


Thanksgiving Humor

“Vegetables are a must on a diet. I suggest carrot cake, zucchini bread, and pumpkin pie.”

— Jim Davis

If you are like most Americans, today you are probably feeling just a little guilty about the extra calories you consumed yesterday. While I certainly can sympathize, it’s also helpful to keep a little humorous perspective about the situation. Here, cartoonist Jim Davis (of Garfield the cat fame) provides the requisite laughter we all should keep in mind.

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Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Ask Doug.

In case you missed it, I encourage you to read my e-letter column from last week about my best ideas for growth investors in 2016. I also invite you to comment in the space provided below my commentary.

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