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Currently, I am getting ready to release the last article of a three part series of suggested holdings to create an aggressive income investment portfolio. The first two articles, Part 1 (MReits, BDC’s, Energy, and Trusts) and Part 2 (Shipping, Fertilizers, Municipal CEF’s, and Pipelines) were extensive. To lighten things up, I thought it would be a good change of pace to shift gears and present a unique kind of income investing based on very specific Exchange Traded Funds (ETF) and Closed End Funds (CEF). These funds, though not classified as aggressive income for the most part, are still some investment vehicles that the average income investor might consider adding to their portfolio holding.

In the chaotic and confusing world of finance, individuals will attempt to bring some resemblance of order by trying to compartmentalize each investing discipline with a label. One of these labels is that of the income investor, but often goes no further. A closer look though reveals that the classification does not just end there. In reality there are many different kinds and styles of income investing. For example, one could take the conservative approach, like holding such items as Certificates of Deposit [CDs], fixed annuities and high grade government/corporate bonds, or they could be at the opposite end of the spectrum using the option markets and derivatives. Needless to say, the classification of being an income investor really needs to be viewed from several different angles.

In this article we present a couple of specific products that any income investor may use to meet their end goals. These investment vehicles are global Exchange Traded Funds (ETF) and Closed End Funds (CEF) that focus on individual countries around the globe as opposed to a sector or region. This gives the investor the ability to make a more surgical focus of investing dollars into a very specific country that appeal to the investor’s overall end goals. Furthermore, it gives the income investor a portfolio holding that might not be as sensitive to changes in interest rates as compared to a portfolio made up of 100% bonds. The ETFs and CEFs listed here will all have competitive distributions and dividends that are the life blood to the income investor.

Australia

Our first stop on the tour is in the great country of Australia. Home to the Great Barrier Reef, shrimp on the barbie, and the kangaroo. For the income investor, one would want to look at iShares MSCI Australia Index Fund (EWA). The iShares MSCI Australia Index Fund ETF seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Australian market, as represented by the MSCI Australia Index. Specifics of the fund are as follows:

  • Total Net Assets: $3,065,142,976

  • Expense Ratio: 0.53%

  • Shares Outstanding 122,800,000

  • Total Holdings: 73

  • Yield: 4.1%

As you can guess, this fund holds a good deal of mining and natural resources stocks. What most people do not know though is that the fund’s second largest holding by percentage is actually banking related. EWA's top holdings are as follows:

NAME Percent of Portfolio

BHP BILLITON LTD (BHP) 15.07%

COMMONWEALTH BANK OF AUSTRALIA (OTCPK:CBAUF) 8.68%

WESTPAC BANKING CORP (WBK) 7.18%

AUST AND NZ BANKING GROUP (OTCPK:ANZBY) 6.12%

NATIONAL AUSTRALIA BANK LTD (OTCPK:NABZY) 5.96%

RIO TINTO LTD (RIO) 3.88%

(Click on this and all charts below to enlarge)

Brazil

Next stop is one of the largest countries in South America. Brazil is the home of the biggest party in the world, Carnival and some of the best rum. If an income investor were to look here they would need to go no further than MSCI Brazil Index Fund (EWZ). The iShares MSCI Brazil Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Brazilian Market, as measured by the MSCI Brazil Index. Specifics of the fund are as follows:

  • Total Net Assets $12,058,459,895

  • Expense Ratio 0.61%

  • Shares Outstanding 174,350,000

  • Total Holdings 90

  • Yield: 4.96%

Much like Australia, EWZ's holdings are heavily weighted in both materials and energy at a whopping 44%. Also coming in second place at 25% of the total holdings is the country’s financials. EWZ's top holdings are as follows:

NAME Percent of Portfolio

PETROBRAS - PETROLEO BRAS-PR (NYSE:PBR) 10.29%

CIA VALE DO RIO DOCE-PREF A (NYSE:VALE) 9.29%

ITAU UNIBANCO BANCO MULTIPLO SA (NYSE:ITUB) 8.60%

PETROBRAS - PETROLEO BRAS (PBR) 8.06%

CIA VALE DO RIO DOCE-ADR (VALE) 6.57%

BANCO BRADESCO -PREF (NYSE:BBD) 5.58%

Germany

Moving on to another continent we arrive in Germany; home of some of the best beer in the world and need I say more than the word “Oktoberfest”. At first an income investor might want to pass on the iShares MSCI Germany Index Fund (EWG) as its yield is only 2.5%. The only reason though it is mentioned is that Germany is arguably the strongest economy in Europe. A 2.5% yield may be helped along with the use of covered calls at some point. The fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the German market, as measured by the MSCI Germany Index. Specifics of the fund are as follows:

  • Total Net Assets $3,620,789,899

  • Expense Ratio 0.53%

  • Shares Outstanding 141,000,000

  • Total Holdings 53

  • Yield : 2.5%

This fund’s top holdings are Consumer Discretionary and financials. EWG's top holdings are as follows:

NAME Percent of Portfolio

SIEMENS AG-REG (SI) 10.86%

BASF SE (OTCQX:BASFY) 8.64%

DAIMLER AG (OTCPK:DDAIF) 6.54%

BAYER AG (OTCPK:BAYZF) 6.40%

ALLIANZ SE-REG (OTCQX:AZSEY) 6.09%

DEUTSCHE BANK AG-REGISTERED (NYSE:DB) 5.25%



Spain

Moving on in Europe, we arrive in Spain, the land of bull fighting and Pablo Picasso. As the Debt Crisis continues to move its way around the world, one country always seems to be mentioned in the same breath and that is Spain. That being the case, the income investor will want to take extra precaution here before investing. If still interested, one might look at the iShares MSCI Spain Index Fund (EWP). EWP seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Spanish market, as measured by the MSCI Spain Index. Specifics of the fund are as follows:

  • Total Net Assets $209,935,226

  • Expense Ratio 0.54%

  • Shares Outstanding 5,550,000

  • Total Holdings 31

  • Yield: 4.55%

As one can guess, EWP’s main holding is the financials with a total of over 44%. Investing here could be tough, to say the least. The income investor might stand a better chance just fighting the bull in the ring than buying EWP. EWP's top holdings are as follows:

NAME Percent of Portfolio

BANCO SANTANDER SA (STD) 20.98%

TELEFONICA SA (TEF) 19.19%

BANCO BILBAO VIZCAYA ARGENTA (BBVA) 9.19%

REPSOL YPF SA (OTCQX:REPYY) 5.10%

IBERDROLA SA (OTCPK:IBDRY) 5.00%

INDITEX 4.88%

Chile

Back to South America we go and we find ourselves in Chile. This is the home to some great wine, Tierra del Fuego, and the world’s largest open pit copper mine. For the income investor we have a CEF to consider and that is the Aberdeen Chile Fund (CH). This fund is a close-ended balanced mutual fund launched by Aberdeen Asset Management Inc. The fund is co-managed by Aberdeen Asset Management Investment Services Ltd and Celfin Capital Servicios Financieros S.A. It primarily invests in the public equity and fixed income markets of Chile. The fund invests in companies operating across diversified industries. It employs a fundamental analysis with bottom up approach to make its investments. The fund benchmarks the performance of its portfolio against the MSCI Chile Index and conducts an in-house research to create its portfolio. Specifics of the fund are as follows:

  • Total Net Assets $ 166,785,000

  • Expense Ratio 1.85%

  • Shares Outstanding 8,260,811

  • Total Holdings 21

  • Yield: 9.73%

Being a CEF, this fund is actually selling at a premium to net asset value. That premium at the time of this article is 5.8%. The fund’s largest holdings are obviously going to be material, followed by financials. CH's top holdings are as follows:

NAME Percent of Portfolio

Empresas Copec SA (NYSE:ICA) 14.15%

Empresas Cmpc SA 12.21%

Falabella Sociedad Anomina Comercial E 10.26%

Banco Santander-Chile (SAN) 9.94%

Enersis SA (ENI) 8.23%

Sociedad Quimica Y Minera De Chile SA (SQM) 6.19%

Lan Airlines S.A. (LFL) 5.07%


Switzerland

Our last stop will be in Switzerland, that winter wonderland of snow and skiing. For the income investor we have another CEF to consider. The Swiss Helvetia Fund Inc. (SWZ) is a closed-ended equity mutual fund launched and managed by Hottinger Capital Corp. The fund invests in public equity markets of Switzerland. It seeks to invest its portfolio across diversified sectors. It also adopts a macro-economic top down approach focusing on the market volatility, interest rates, inflation forecasts, production capacity, gross domestic product, and earnings to create its portfolio. The fund benchmarks the performance of its portfolio against the S&P 500 Index and MSCI EAFE Index. Specifics of the fund are as follows:

  • Total Net Assets 440.983

  • Expense Ratio 1.32%

  • Shares Outstanding 27,998,951

  • Total Holdings 50

  • Yield: 7.38%

Like our other CEF, SWZ is not going to be selling at par to its net asset value. Currently the fund is selling at a discount of 8.51%. The largest holdings by far are two stocks, Nestle (OTCPK:NSRGY) and Novartis (NYSE:NVS). This fund could prove an interesting way to get exposure to the Swiss at a discount. SWZ's top holdings are as follows:

NAME Percent of Portfolio

Nestle SA (OTCPK:NSRGY) 17.56%

Novartis AG (NVS) 14.06%

Roche Hldgs Ag (OTCQX:RHHBY) 6.26%

Compagnie Financiere Richemont Sa, Serie 3.31%

Ubs Ag (UBS) 3.22%

Zurich Financial Services AG (OTC:ZFSVY) 2.77%

In conclusion, these are just some of the ETFs and CEFs that income investors can use to get different exposure to global markets. Before buying, it is highly suggested that more research be done to make sure it fits your investment needs. For example, dividends are often not distributed more than twice a year on some of the above. Also, as the price moves for each ETF, the yield rate will sometimes make material changes that might affect one's decision to purchase. In the end though, these investments might prove to be just the ticket to collect that global income.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in EWZ over the next 72 hours.

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Source: Global ETFs and CEFs: An Income Investor's Hunt for Yield