A Wild Start to the New Investing Year

Doug Fabian

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

It was the worst first week of the year for stocks — ever.

That’s what the record will reflect for 2016, as equity markets around the world got absolutely slaughtered over the first five trading sessions of the year.

Only a stabilization of markets in China leading up to Friday’s opening bell, along with a much-better-than-expected December jobs report, saved the market from more punishment on the week.

Still, as of midday Friday, the real hemorrhaging already had been done.

Check out these gruesome week-to-date numbers, as they pretty much say it all:

  • S&P 500 Index, -4.90%
  • Dow Jones Industrials, -5.14%
  • NASDAQ Composite, -6.15%
  • NASDAQ 100, -5.83%
  • Russell 2000, -6.78%

spx_0108

The only significant exceptions to the selling this week were in traditional flight-to-safety assets such as gold and U.S. Treasury bonds.

So, what does this wild and crazy start to the market mean for investors going forward?

Well, it means that just doing what you did last year will probably not be sufficient to reach your investing goals.

It also means you need to put the power of a proven plan on your side, a plan that gets you out of stocks during periods of acute and prolonged market stress — and back into stocks as they begin to regain their bullish mettle.

A plan like this is at the heart of my Successful ETF Investing newsletter, and it is that plan that has delivered outstanding returns for investors just like you for nearly four decades.

If this week’s selling isn’t enough to get you to put a plan in place, then I don’t know what will.

Fortunately, you can check out that plan today, and just in time to avoid any more damage to your hard-earned money.

ETF Talk: This Real Estate ETF Could be a Home for Your Money

This week’s exchange-traded fund (ETF) spotlight for income and dividend investors focuses on the iShares U.S. Real Estate ETF (IYR), a “fund of funds” that gives investors broad-based exposure to real estate investment trusts (REITs) operating in the market today.

View the current price, volume, performance and top 10 holdings of IYR at ETFU.com.

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REITs are a fantastic tool for generating yield, and IYR is a way for investors to gain access to a number of them all in one place. The fund tracks the Dow Jones U.S. Real Estate Index, which measures the performance of the real estate market in the United States.

While the majority of components for the real estate index are various types of REITs, there also are a selection of large-, mid- and small-capitalization companies included in the index, plus some real estate holding and development trusts.

IYR was down slightly in 2015, experiencing a 3% loss in its share price. However, the fund has risen nearly 8% in the past few months in spite of all the uncertainty and tension that persists in the market. In addition, the fund paid a dividend of $2.94 per share in 2015, amounting to a solid 4% yield.

If the overall market can stabilize and find its footing again, IYR may be looking at a good year in 2016. IYR’s expense ratio currently sits at 0.43%, and the fund has some $4.7 billion in assets under management.

IYR

About 95% of IYR’s total assets are invested in REITs. However, each individual holding is fairly small. Some of the most significant holdings include Simon Property Group REIT Inc. (SPG), 7.08%; American Tower REIT Corp (AMT), 4.83%; Public Storage REIT (PSA), 4.29%; Equity Residential REIT (EQR), 3.5%; and Crown Castle International REIT Corp. (CCI), 3.39%.

If you’re looking to generate income by investing in real estate and REITs, iShares U.S. Real Estate ETF (IYR) could be a good pick for 2016.

Remember to look for the current price, volume, performance and top 10 holdings of IYR at ETFU.com.

If you want my advice about buying and selling specific ETFs, including appropriate exit points, please consider subscribing to my Successful ETF Investing newsletter.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

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The Best ETF Ideas for 2016

Over the past several weeks, we’ve covered what I think are the five best ETF ideas for 2016 for both growth investors, and income investors.

Here’s a quick review of all 10 ETFs on our list.

Growth ETFs

1) Health Care Select Sector SPDR Fund (XLV). Health care is an industry that continues benefitting from demographics, innovation, mergers and acquisitions (M&A) deals and insurance mandates. XLV is the ETF that holds the biggest and best health care 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 health care all are part of this fund.

3) PureFunds ISE Cyber Security ETF (HACK). This is the cyber security stock ETF, one that we’ve written about extensively in this publication, and 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 the 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.

Income ETFs

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, and with an eye toward shorter-duration bonds.

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.

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

4) iShares US Real Estate ETF (IYR). Real Estate Investment Trusts, or REITs, are a fantastic tool for generating yield, and 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!

The Power of “If–”

If you can keep your head when all about you

Are losing theirs and blaming it on you…

— “If–” by Rudyard Kipling

Given the craziness in stocks this week, it seems more than just a little appropriate that we should reflect on the ultimate literary work for learning how to stay calm in the face of unknowns. For the full effect of Kipling’s reassurance, I recommend checking out his seminal poem, “If–”. I suspect you’ll find his advice more than just a little helpful.

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 the most important ETFs to keep your eye on this year. I also invite you to comment in the space provided below my commentary.

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