There are about a thousand of them listed on the U.S. exchanges.
They track everything from the S&P 500... to gold... to
... and much more.
They are basically nothing more than portfolios of stocks, bonds or
commodities that trade on the major exchanges as a single security.
But underneath a placid exterior, one of America's fastest-growing
classes just reached a key milestone: Total assets invested in U.S.
exchange-traded funds (ETFs) surpassed $1 trillion for the first
This represents the culmination of a remarkable episode of growth.
The first U.S.-traded ETF was launched on Jan. 29, 1993 -- so it
took fewer than 19 years for the ETF industry to crack the $1
To put that in perspective, it took the mutual-fund industry (first
launched in 1924) 66 years to surpass $1 trillion in assets.
Assets invested in ETFs have grown at a 31% annualized pace since
2000 -- compared with just 6% annual growth for
. And alongside the growth of ETFs is the growth in closed-end
The differences between CEFs and ETFs are small -- both allow you
to buy into a basket of securities with one simple transaction. And
you can buy them throughout the day, just like a stock.
Yet many investors don't realize just how powerful a tool ETFs and
CEFs can be for income investors.
Let me give you an example. I've told you
about the abundance of high-yielding stocks around the world (at
we found 412 companies based outside the United
States paying more than 12%
And there are hundreds of foreign stocks listed on the major U.S.
exchanges. But there are tens of thousands of foreign stocks that
don't trade in the United States. Buying these stocks can be
difficult for the average investor.
ETFs and CEFs break down all these barriers, allowing investors to
buy broadly diversified baskets of dividend-yielding foreign stocks
without paying higher commissions to their broker or dealing with
In short, they can make buying a portfolio of high-yielding stocks
from say, Brazil, as simple as buying a share of
And thanks to these funds, investors can capture some pretty
significant returns and yields that would otherwise be untouchable.
portfolio, we hold
AllianceBernstein Global High Income Fund (NYSE:
. AWF invests in bonds from around the world -- including
foreign-government bonds from
and U.S. corporate high-yield bonds.
Normally, it would be next to impossible for average investors to
buy the securities AWF holds. But with the fund, you can access
them all in one simple transaction.
, we locked in a 17.1%
when we purchased AWF in March of 2009. And since then the fund has
brought a total return of more than 160% to anyone who followed our
lead. Today, even after the rebound, the shares still trade with a
Risks to Consider:
Despite these positives, these funds aren't perfect. Investors
can often earn higher returns by picking individual stocks and
there are management fees that cut into returns.
Action to Take -->
But by allowing serious income investors to access some of the
highest-yielding securities on the planet as simply as a share of
General Electric (NYSE:
, Wal-Mart, or
, the extra costs are usually worth it.
As I said, there are many high-yielding investments outside the
U.S. borders. I've found more than 400 of these "other" companies
paying 12%-plus yields... and thousands more paying above 6%. But
most U.S. investors have no idea that these securities even exist.
Meanwhile, many of the world's wealthiest investors -- including
Warren Buffett -- have been quietly cashing in on them for decades.
Watch this free presentation to get more details
about these 12%-plus yields
-- Paul Tracy
Disclosure: Paul Tracy and/or StreetAuthority, LLC hold a
position in AWF.
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