Red, white and blue chips.
America, despite what certain campaign slogans might have otherwise implied, is pretty darn great already. And among the things we can boast is a robust stock market that not only produces rip-roaring returns regularly, but has done so in a much more stable manner historically than a host of overseas bourses. While it does pay to diversify geographically, and occasionally other individual countries can deliver a red-hot run (think India or Brazil since the start of 2016), it’s difficult to top the combination of both total returns and reliability of American stocks. Here is a look at a number of all-American exchange-traded funds that could make your portfolio great.
iShares Russell 2000 ETF (ticker: IWM)
Yes, the Standard & Poor’s 500 index and Dow Jones industrial average are a who’s-who of red-white-and-blue chips. However, many of those companies have extremely wide multinational operations. In some cases, half or more of these companies’ revenues are generated outside the United States. You’ll be hard-pressed to find a more all-American broad index fund than the IWM, which consists of thousands of U.S. stocks, many of which are purely domestic in reach. Right now, top holdings include Alabama-based post-acute health care service provider HealthSouth Corp. (HLS) and Idaho electric utility Idacorp (IDA).
Expenses: 0.2 percent or $20 per $10,000 invested
ProShares S&P 500 Dividend Aristocrats ETF (NOBL)
If you are going to invest in the bigger, more geographically diverse blue chips domiciled in America, you should invest in the best. While you can gauge that several ways, one excellent option is dividend longevity, honored by ProShares’ NOBL. The NOBL invests in the S&P 500’s Dividend Aristocrats — a status a company can achieve only by paying (and increasing) its annual payouts for a minimum of 25 consecutive years. This doesn’t mean you’ll be treated to high yield, but these companies should at least be good for well-funded, slowly improving dividends over time. Top holdings include C R Bard (BCR) and McDonald’s Corp. (MCD).
Expenses: 0.35 percent
Consumer Discretionary Select Sector SPDR Fund (XLY)
For better or worse, America has been synonymous with consumption — food, goods, you name it — thanks to the robust middle class born from decades of economic expansion. The makeup of the nation’s consumer stocks is in constant flux, so while the biggest names of yesteryear might have been brick-and-mortar specialty retail operators, the top holdings of XLY today include e-commerce giant Amazon.com (AMZN), cable/internet provider Comcast Corp. (CMCSA) and entertainment conglomerate Walt Disney Co. (DIS). But the idea is the same — XLY holds the names most likely to be propelled higher by the strength of the American consumer.
Expenses: 0.14 percent
iShares U.S. Aerospace & Defense ETF (ITA)
It’s also difficult to think about America without conjuring up images of our first-in-class military and the countless contribution the United States has made to the aerospace industry; iShares’ ITA ETF covers both sides of that coin. For instance, top holding Boeing Co. (BA) is one of the world’s top commercial aircraft makers, while General Dynamics Corp. (GD) produces Gulfstream jets. Then there are military contractors such as Lockheed Martin Corp. (LMT) and its F-35 Lightning II fighter, and Raytheon Corp. (RTN) and its Patriot missile systems.
Expenses: 0.44 percent
Vanguard REIT ETF (VNQ)
America’s real estate industry is in full-blown recovery after the 2007 to 2009 financial crisis and stock market implosion, and that’s being led by the many holdings of Vanguard’s VNQ — a basket of 157 U.S.-based companies that own or operate real estate across the country. Companies like Simon Property Group (SPG) own a wide swath of America’s malls, AvalonBay Communities (AVB) has a wide footprint in the country’s apartment complexes, and Public Storage (PSA) is one of the nation’s most prominent self-storage names. These real estate investment trusts also help put cash in the pockets of American investors, who would collect a 4.4 percent yield on VNQ at current prices.
Expenses: 0.12 percent
PowerShares Dynamic Building & Construction Portfolio (PKB)
Similarly, America’s housing market has been in full rebound mode, with many of the country’s largest markets now boasting higher average prices than before the housing crash of the late aughts. Homes seemingly can’t be built fast enough, as demand is hitting the, ahem, roof. The PowerShares Dynamic Building & Construction Portfolio is a collection of companies “winning” from this trend, whether it’s homebuilders such as Lennar Corp. (LEN) and NVR (NVR), or companies that benefit from improved homebuilding such as insulation specialist Owens Corning (OC) or ready mixed concrete company US Concrete (USCR).
Expenses: 0.63 percent (includes 5-basis-point fee waiver)
Alerian MLP ETF (AMLP)
You’ve no doubt heard a lot of talk about U.S. energy independence and even energy “dominance” of late, and this typically leads investors to think about exploration and production plays like ConocoPhillips (COP) and Phillips 66 (PSX). But we should give a nod to a less heralded hero of America’s energy renaissance — energy master limited partnerships, which are largely responsible for the transportation and storage of oil, natural gas and other resources. Alerian’s AMLP is a collection of roughly 30 such companies, including Enterprise Products Partners (EPD) and Magellan Midstream Partners (MMP). Like VNQ, AMLP features a high dividend of 7.7 percent.
Expenses: 0.85 percent
VanEck Vectors BDC Income ETF (BIZD)
Business development companies are a niche play on the growth of the American small business. BDCs do what many larger banks and financial institutions won’t, which is provide financing to small and mid-size companies that admittedly are fraught with risk thanks to their lack of resources. Right now, VanEck’s BIZD holds 26 BDCs, including large allocations to Ares Capital Corp. and Prospect Capital Corp. (PSEC). And like REITs, BDCs must pay out at least 90 percent of taxable income as dividend to shareholders, so they’re a high-income play; BIZD currently yields 8.3 percent.
Expenses: 9.2 percent (factors in 8.79 percent in indirect expenses already reflected in BDCs’ performance)
iShares 20+ Year Treasury Bond ETF (TLT)
U.S. Treasury bonds are debt issued by the American government and have roots going back all the way to World War I, when the U.S. issued war bonds to fund its efforts. Treasurys are issued with the “full faith and credit” of the United States and are among the safest investments on the planet. One of dozens of funds dedicated to Treasury debt, iShares’ TLT invests in bonds that will mature in more than 20 years. They have higher interest rate risk but pay higher yields; TLT’s 2.5 percent annually is a fine figure for the high security of U.S. debt.
Expenses: 0.15 percent
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF (TFI)
Another way to invest in America is to do so through its smaller divisions — specifically, in states and other local municipalities. So-called “municipal bonds” are a favorite among income investors because they’re still relatively safe compared to many corporate bonds, while doling out income that is tax-free at the federal level (and state and local levels depending on where you live). TFI is heaviest in California and New York munis at roughly 20 percent each, followed by Texas at nearly 13 percent. And while its headline yield is just 2.3 percent, that comes out to about 3.8 percent tax-equivalent for the highest tax bracket.
Expenses: 0.23 percent (includes 7-basis-point fee waiver)
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10 All-American ETFs to Buy Now originally appeared on usnews.com
