Exchange Traded Funds (ETFs)

Invest in Global Equities and High Yield With This Fund

The Principal Active High Yield ETF (YLD) is an exchange-traded fund (ETF) that provides income through exposure to global equities, investment-grade and high-yield debt, mortgage-backed securities (MBS)/asset-backed securities (ABS), preferred stock, master limited partnerships (MLPs) and real estate investment trusts (REITs).

I like that the ETF with $107 million in assets is actively managed and seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of its net assets, plus any borrowings for investment purposes, in below-investment grade (also known as “junk” or “high yield”) fixed-income securities. Such securities include bonds and bank loans.

Specifically, YLD invests in U.S. Treasury bills, bonds and other obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities. The ETF also can offer exposure to investment-grade bank loans (also known as senior floating rate interests), and preferred securities.

Source: www.stockcharts.com

YLD’s share price, as of this writing, trades around $18, giving it an impressive 6.46% dividend yield. Its expense ratio is 0.39%, meaning it is relatively inexpensive to hold in relation to other exchange-traded funds.

This fund is a truly active ETF because its portfolio manager has broad leeway to invest across asset classes and geographic boundaries in search of income, unlike active ETPs with index-based strategies. The portfolio manager vaguely provided selection criteria for eligible securities such as economic factors, credit spreads, investor sentiment and momentum.

The fixed-income component may include corporate and sovereign debt, investment-grade and high-yield debt, convertibles, preferred stock, mortgage securities and floating-rate instruments. The manager faces no exposure limits of any kind, other than those mandated by RIC compliance.

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With any new opportunity, potential investors should conduct their own due diligence in deciding whether or not this fund fits their own individual investing needs and portfolio goals.

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

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.