Monday, 30 June 2014

London's Juicy Bond ETFs

It's all about the juice...
Source
I'm always on the hunt for interesting Exchange Traded Funds (ETFs). Not just any, of course, but specifically high-yield and preferably geographically diversified. What is slightly surprising to me (given the wealth of data available) is that these are not so easy to find - there does not seem to be a comprehensive list that is ranked by yield.

I recently looked at high-yield dividend ETFs. Today I'm specifically looking for fixed-income ETFs quoted on the London Stock Exchange. So here goes with some more real-life Do It Yourself investing...
AAs I have already said, I haven't found a good source of potential ETF targets. Topyields is one of the more useful sites for identifying high-yielders, including some ETFs - but it does not have a page specifically for the London market ETFs (and you should be aware that you may need to double-check some of the numbers that appear).

Even finding the yields from the ETF providers can be difficult, so I tend to rely on the data provided by Bloomberg. Having said that, you obviously need to know what ETF to look for - and therein lies the challenge.

So to help you on your way (assuming you are interested in this corner of the investment world) here is a list of  high-yield fixed-income ETFs I have come across recently that have an attractive yield. I can't claim that it is comprehensive, so do let me know if I've missed any of your favourites. Currency and current yields (from Bloomberg) are shown.

I think that is quite an interesting collection and it might provide the basis for a well-diversified portfolio for the longer term. That's assuming that we know what will happen to worldwide bond yields/prices - which we don't (other than that it is likely to fall in some developed markets). My own strategy is to buy the highest yields (within reason) - but many experienced investors might see this as rather na├»ve! Still, it seems to have worked for me over the last few years...

But do make your own assessment.

[The DIY Income Investor portfolio currently holds IHYG, SEML, SHYU and EMDD]

[Update 2/7/14 - .... and now includes HYLD]


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.

4 comments:

  1. Hi DIYII,

    I'm interest to know how long you've been investing in bonds. While I've dabbled I've yet to feel I fully understand the market like I do with equities.

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    1. Hi UTMT

      Several years - enough to get in at the beginning of the bond boom due to QE and then to sell off now the market is heading for an unwind. However, I see fixed-income as a necessary stabilisation factor in the portfolio - even more so when you can spread the risks with an ETF. But I don't understand why bonds prices haven't fallen further sooner.

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  2. Hi DIY,
    I was looking ay buying VHYL (World High dividend ETF), one of your current holdings. Bloomberg shows yield of 5.47% - is this correct based on your actual income you received in 2013/2014 ?

    I always have to triple check ETF dividend yields and often have to look at historical distribution data to get an accurate answer.

    Thanks,

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    1. Yes Anon - this can be a problem and it sometimes requires a lot of digging to get the actual figures. I haven't specifically checked VHYL but on previous detailed reviews of other ETFs I have found that Bloomberg's trailing 12 month figure is accurate - that's why I use their data!.

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