But I digress: gunslingers are usually paid by results, so how have they done? And I've just thrown some more cash in their direction - are they going to make a killing?
Regular readers will recall that I turned to ETFs rather reluctantly, as I don't like paying someone else (like a fund manager) to do what I can do myself (and seemingly more successfully too).
However, I did begin to worry that my life savings were committed to savings and investments denominated solely in UK Sterling, so I began to diversify globally. But this is difficult to do as a small investor due to the tax and currency complications, so I turned to ETFs, which are available in all sorts of styles and which manage the admin side for a (usually) reasonable charge. ETFs also give you instant diversification, which is nice, but have the downside of being more volatile than my usual set of London-based investments.
Being a DIY Income Investor, I have specialised in ETFs that generate income - both from dividend shares and fixed-income investments. My first ETF was based on the UK dividend market (and there are alternatives):
- IUKD: iShares FTSE UK Dividend Plus ETF: the 50 highest-yielding FTSE 350 stocks, excluding investment trusts, selected and weighted by one-year forecast dividend yield.
- ISXF: iShares Markit iBoxx £ Corporate Bond ex-Financials ETF: sterling-denominated, investment-grade corporate bonds, issued by non-financial organisations, with a minimum remaining time to maturity of one year and a minimum amount outstanding of £100 million.
But leaving the UK gunslingers to one side, my Wild Bunch of international ETFs (all quoted on the LSE) consists of :
- Emerging Markets:
- EMDV: SPDR S&P Emerging Markets Dividend ETF
- EMDD: SPDR Barclays Emerging Markets Local Bond UCITS ETF
(Follow the links for more information on these.) As you can see, the ETFs are based on either dividend shares or fixed-income, covering different geographical or currency regions (or the world!).
Overall, ETFs make up 15% of my portfolio and I intend to increase their share as a way of 'banking' the proceeds of my more speculative investments. Of course, ETFs themselves have a degree of primarily market risk, as well as currency risks although they are usually well diversified between different holdings.
In other words, they can still fluctuate in price and therefore in yield - and they have! My own results are quite mixed (current yields based on Bloomberg data):
- IHYG: (current yield) 6.7% - (value change) breaking even
- IDVY: 5.8% - up 8%
- EMDV: 5.8% - down 16.5%
- EMDD: 4.9% - down 6.5%
- IAPD: 4.9% - breaking even
- XGSD: 4.6% - breaking even
- VHYL: yield is not yet reported - breaking even
So, Emerging Markets have not performed at all well - the price has fallen by nearly three-years-worth of dividends!
But my strategy is to top up my holdings when the yields are attractive (i.e. when the prices are depressed), so I have today topped up my holding of EMDV, specialising in Emerging Markets dividends, heavily weighted towards Brazil, Taiwan and China.
The Wild Bunch would be right at home!
[Purchase price: £12.98]
Update 12/12/13: The process has continued: ETFs now make up 30% of the portfolio.
I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.