5 ETFs that are Better Bets than Mutual Funds

Harry Domash  |

In a recent article, I highlighted five mutual funds that had consistently outperformed the overall market over the last 12-months, as well as over the past three and five years. My goal was to pick current out-performers that are likely to continue their winning ways.

Today, I’ll do the same thing for exchange-traded funds (ETFs). ETFs and conventional mutual funds are similar in that both track the performance of a relatively large number of stocks, creating automatic diversification and relieving investors of the task of analyzing individual stocks.

However, ETFs are easier to trade. You buy them just like stocks, and you can trade them as often as you’d like. By contrast, mutual funds only trade once daily, after the market closes. Further, most enforce minimum holding periods before you can sell, have minimum purchase requirements, and trading costs are often higher.

All that said, you’d think that you’d get better returns from mutual funds. Most are actively managed by professionals who can react to changing market conditions. By contrast, ETFs typically track fixed indexes that are only updated quarterly or semi-annually.

But that’s not necessarily the case. Here are five ETFs generating returns as good or better than the mutual funds that I described before. To avoid distortions triggered by Brexit-incited volatility, returns quoted were as of June 22, 2016.

Guggenheim S&P 500 Equal Weight Consumer Staples (RHS) - Tracks a 36 stock index comprised of US firms in the food and beverage, household products, personal products, and tobacco industries. Biggest holdings include Mead Johnson Nutrition (MJN), Monster Beverage (MNST), and Sysco Corp (SYY). The fund has returned 17% over the past 12-months, as well as 17%, on average annually, over the past three and five years. Pays quarterly dividends equating to a 1.6% dividend yield.

PowerShares High Yield Equity Dividend Achievers (PEY) - Tracks an index of the highest yielding large-cap stocks that have increased dividends annually for at least 10-years. Biggest holdings include Vector Group (VGR), ONEOK (OKE), and Helmerich & Payne (HP). Returned 19% over 12-months, and 18% and 16% on average, annually, over three and five years. Pays monthly dividends, 3.3% yield.

Pimco 25 Plus Year US Treasury (ZROZ) - Tracks index of Treasury STRIPs, which are derivatives of US Treasury bonds sold at discounts and not entitled to interest payments, only to principal repayments when the notes are due. Relatively volatile; returned 22% over the past 12-months, and 15% on average annually, over the past three and five years. Pays quarterly dividends, 2.6% yield.

PowerShares S&P 500 Low Volatility (SPLV) - Tracks the 100 least volatile stocks in the S&P 500. Biggest holdings include AT&T (T), Waste Management, and Coca Cola (KO). Returned 13% over the past 12-months and 13% and 14% over three and five years. Pays monthly dividends, 2.1% yield.

Powershares S&P SmallCap Utilities (PSCU) - Tracks 20 natural gas utilities and telecom stocks in the S&P SmallCap 600. Biggest holdings: Piedmont Natural Gas, Southwest Gas, and Spire (formerly Laclede Group). Returned 29% over 12-months, and 18% and 14% over the past three and five-years.

Pimco 25 Year US Treasury and PowerShares S&P SmallCap Utilities are both lightly traded. In those situations, it’s best to specify “Buy Limit” prices (maximum buy price) when purchasing.


For tips and information on the best utilities and dividend stocks from Harry Domash, please check out Dividend Detective.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
OKE ONEOK Inc. 69.30 1.35 1.99 2,117,105 Trade
SYY Sysco Corporation 72.96 0.71 0.98 6,745,277 Trade
VGR Vector Group Ltd. 11.71 0.34 2.99 1,187,699 Trade
MNST Monster Beverage Corporation 57.18 0.23 0.40 1,866,957 Trade
KO Coca-Cola Company (The) 54.41 0.54 1.00 14,288,686 Trade
T AT&T Inc. 34.97 0.63 1.83 31,102,985 Trade

Comments

Watchlist

Symbol Last Price Change % Change
AAPL

     
AMZN

     
HD

     
JPM

     
IBM

     

What Is Petrolithium?

MGX Minerals explains the advantages of petrolithium and how they are helping to solve future problems today.