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iShares Has Introduced a Preferred Stock ETF (PFF)
By JLP | April 10, 2007
This is potentially good news for investors looking for extra yield and the potential for capital gains. iShares recently introduced the iShares U.S. Preferred Stock Index Fund (PFF). Although there’s not much information available regarding PFF, the index that it tracks, the S&P U.S. Preferred Stock Index, had an indicated yield of 6.4% in September 2006. One would assume that PFF’s yield will be somewhere in that vicinity (although there are no guarantees).
For those of you who may not be familiar, a preferred stock is essentially a hybrid between a bond and a stock. It’s not quite as safe as a bond, but preferred dividends must be paid before common stock dividends. So, there is some safety involved. For more information, see this definition I found on InvestorWords.com.
As of this writing, financials make up 82.5% (or 23 out of the 29 securities) in the fund, so it’s not exactly diversified.
For more on preferred stocks, you might want to check out these sources I found:
Standard & Poor’s Preferred Stock Primer (PDF)
Standard & Poor’s U.S. Preferred Stock Index Fact Sheet (PDF)
Topics: Exchange-Traded Funds, Investing | 3 Comments »
April 10th, 2007 at 7:14 pm
JLP,
I just wanted to take a sec to thank you for your resent “investment-focused” posts. I’m working HARD to put money away for retirement, but I’m LOST as to where to actually invest the money. (Funny thing, for me, the ‘saving’ part is relatively easy… it’s deciding what to DO with the money that’s driving me insane!)…
(Beginner Question… The ETF you mentioned would make MORE sense inside of a ROTH as opposed to a Traditional IRA? Right? B/C of the tax implications? Or am I WAY off the mark?)
April 11th, 2007 at 9:14 am
Same same — high dividend/high cg distribution invests work equally well under Roths, Traditionals, 401Ks. The advice is to avoid taxable accounts.
My off the cuff recommendation for a beginning investor:
50% VTI Total Stock Market
35% VEU World w/o USA
15% AGG Total Bond Market
Then as you read more about investing, you can slowly slice and dice it to your heart’s desire. Stuff to add later on in small doses: REIT, Value, Small Cap, Commodities.
April 12th, 2007 at 3:24 pm
My problem is what I can do to save in a taxable account. Online Saving Accounts provide some reasonable returns (~5% APY) but is there anything with better returns that is safer than individual stocks or mutual funds? I view mutual funds as a safe long-term investment but what about for 1-3 year time frame that won’t go towards retirement but just “net worth building”…