For those investors that are looking for dependable sources of income in the form of investments but with very little risk involved, Preferred stock ETF also called and referred to as stock-bond hybrids give investors a broad exposure to the high-yield corner of the world. These forms of investments are no where correlated to bonds and common stocks. The preferred share investors receive fixed dividend payments which are decoded at the time of issuance of the portfolio. There are many benefits involved in this form of investment. Such as the tax benefits involved. As these forms of investments don't belong to the group of bonds they are offered tax benefits and only taxed on the dividends which are similarly taxed on preferential rates.
The second benefit is the determination of rates of dividends. The amount of dividends is decided at the time of issuance of the fund. Serving as the most efficient and secure form of investment, preferred stock ETFs are the winners of the rally! At the time of turbulent waters the preferred stock investors are given their dues on priority bases and common-stock dividends holders are the first to be axed. This ensures the safety of the funds and thus the increase in their popularity among the higher age group, which likes to invest in the safe and secure forms of investments after their retirements.
The SPFF comprises of the highest-yielding preferred securities listed in the U.S. and Canada with at least $250 million in market cap and the most popular among the band wagon of ETFs present in the market due to its dominance by fixed-income holdings.
Most of its sector allocation is tilted towards the financial sectors blocking nearly 84% of the assets allocated with the portfolio. The remaining assets are placed in the materials and telecommunications sector.
Investing in the companies individually is a rather complex strategy, and the only reason for the recognition and attractiveness of the Exchange Traded Funds is the simplicity involved in the funding system. A transparent analysis and valuation of the vehicles is always assessable in the respective stock indexes. Moreover the traditional modes of investment don't particularly offer good returns and also don't pose as hedging funds, an approach associated with the ETFs. The financial market is flooded with this latest trend of funding.
This high yielding investment has certain risks also involved with it. As these funds have fixed interest rates and are prone to risks involved in the regulation changes, there is a good risk evolved in it. They are sensitive to downward changes in the interest rates. A rise in the interest rates will lead to a definite fall in the prices and valuations of these funds.
The only similarities between the preferred stock mutual fund share with the bonds and equities is that just like the equities they have the capability to appreciate in value and offer the investors an additional source of income growth, and like the bonds they have the capacity to give stable dividends and regular distributions.