In my writing, I typically focus on dividend-paying ETFs that have strong yields, returns, and buy ratings. Occasionally, I also discuss weaker ETFs to caution investors about their shortcomings and suggest suitable alternatives. In this article, I will provide a brief overview of three such ETFs.
HYG – Expensive High-Yield Bond ETF
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is the largest high-yield bond ETF in the market, with $16.5B in assets. HYG is also one of the most expensive high-yield bond ETFs, with a 0.49% expense ratio, which is double the industry average. This high expense ratio negatively impacts HYG’s dividend yield and returns, making it less attractive compared to other ETFs with lower expenses and stronger performance.
BIL – Simple T-Bills ETF
The SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) is a straightforward index ETF with minimal risk, volatility, and drawdowns. While BIL has an average 0.14% expense ratio, there is a better alternative in the form of the Alpha Architect 1-3 Month Box ETF (BOXX) which offers comparable returns through equity options and potential tax benefits.
MORT – Risky mREIT ETF
The VanEck Mortgage REIT Income ETF (MORT) invests in mREITs, which are financial institutions focused on leveraged mortgage investments. While MORT offers a high dividend yield of 11.9%, it also comes with significant risk due to the high leverage ratios of mREITs. Investors looking for strong yields have better alternatives such as the VanEck BDC Income ETF (BIZD) and the Panagram BBB-B Clo ETF (CLOZ), which offer higher returns with lower risk.
In conclusion, while HYG, BIL, and MORT are dividend-paying ETFs, there are stronger alternatives available for investors seeking better performance and lower risk.
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