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  • A Dividend White Paper On The Highest Yield Funds 0 comments
    Mar 25, 2013 12:39 AM

    The lack lustre returns in various governmental debt policies may out survive most upsides, at least in the near term. Despite the United States Federal Reserve's quantitative easing programme, which is aimed at increasing the liquidity and loaning in the market in a zero/nominal interest rate environment, the gloom around the conventional market products may continue for more years to come and mean while all corrective measures may easily lead to higher Inflation levels.

    A pro inflationary scene develops an exclamatory reaction in retail, institutional investors and traders towards High yield ETFS and bonds. As recently calculated, government grade securities have given returns lower than 3%, this has created a shift towards high paying bonds to meet their return goals in the minds of individuals who previously chose former.

    Also the risk viewed with such high revenue causing products is reduced with greater income generation, hedging positions and shorting options they have on offer. These returns can exceed inflation there by creating a favourable speculation but one needs to bear in mind that in a falling market such bond's prices can depreciate rapidly and they do not ensure the desired diversification (properties) in a portfolio. Highest Income ETFs on the other hand use a basket like methodology while stock picking thus show a far greater risk resistance than most bonds while churning out double digit returns that are synonymous with top dividend paying mutual funds.

    In an estimate made, last year towards the end of the second quarter, close to $ 40 million poured into the highest dividend yield ETFs and mutual funds.

    In a five year period that ended with the end of 2012, the S&P 500 had an annual return of a total of approximately 1.66 % in relation to the 9.6 % returns achieved by the Credit Suisse High yield index.

    An aggressive central bank policy in the U.S though has pressed down the yields on riskier debt. But there still remains a comfort bolster in the greater yielding bonds in the current year so far with a modest increase in interest rates. The exchange traded products offering lucrative dividends are spreading the markets. Along with other factors these highest income funds definitely differ in risk - reward values and volatility amid choppy trades.

    The Broad division Achievers index has companies that have shown increase in annual dividends over period of 10 or more continuous years.

    The Power shares Dividend portfolio tracking this index is therefore not likely to have a huge yield as this factor is not considered as an index inclusion requirement.

    On the contrary there are indexes made on purely yield criterion, for instance the Solactive Super Global Dividend Index has gained close to a 15 percent in 2012 and Global X Super Dividend fund; a pure play on this index has bestowed a 30 day SEC Yield of 6.88% as of 28/2/2013.

    The fund issuers who have recently announced a SDIV white paper, clearly stress on the fact that higher yields with times will in fact lead to better returns and a even a beta which may very well be lower than one.

    The logic used here is to generate income through a collection of stocks and mixed strategies giving out greater returns and a lesser (though good enough) emphasis is on stability.

    A long term value addition and a higher risk tolerance is the clear agenda on dividend white paper which also concludes that the top dividend equity is still not participating among the known global benchmarks hence investors may use this leverage as the financial world at large is still ignoring this asset class of highest income etf.

    Highest paying dividend etf delivers as per the performance of the namesake Solactive Index. SDIV will include conventional highest yield etf as in Senior Miner like Polka Miedz or big names from the financial world like Standard Life and Provident Financial PLC also find place in this benchmark where each asset enjoys an equal weight age.

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