Tag Archives: demographics

XBI: An Aggressive ETF That Keeps Capturing Massive Returns

Summary XBI is an almost pure play on the biotechnology sector. For investors that want to rely on modern portfolio theory rather than assessing biotechnology companies, this is a solid option. The ETF has shown stronger correlations with international equity than domestic equity which suggests investors may want to limit international exposure when going heavy XBI. The negative correlation for XBI with long term treasury bonds is only mediocre. Compared to the S&P 500, it is more difficult to diversify away the portfolio risk through treasuries. Investors should be seeking to improve their risk adjusted returns. I’m a big fan of using ETFs to achieve the risk adjusted returns relative to the portfolios that a normal investor can generate for themselves after trading costs. The biotechnology sector has been hot and despite being high risk it can be a very profitable area to invest. The challenge is that investors either need specialized knowledge to pick the companies they will hold or a simple strategy for buying into an ETF in the sector. As you might guess, I prefer the second method. My strengths are in analyzing ETFs and mREITs. I’d rather not be forced to figure out which biotechnology companies are most likely to patent the next breakthrough. That makes using an ETF a great way to get exposure. One of the biggest options for that exposure is the SPDR Biotech ETF (NYSEARCA: XBI ). Expense Ratio The expense ratio on XBI is .35%. Sector XBI is not confused about their role. The portfolio is very close to a pure play on the biotechnology sector. Largest Holdings The largest holdings are shown in the chart below: While I usually recognize all the companies within an ETF, this isn’t one of those cases. I know precisely zero of these companies, but I do appreciate that the fund has been designed to be relatively equal weight. For comparison, I also grabbed a chart of the holdings for the index. Index Holdings You may notice that the order of holdings is very materially different. XBI is not just passively tracking the index. Investors might think that means their returns would be very different from the index, but it turns out they actually track the index quite closely. Comparison The following chart shows the performance numbers for several time periods: (click to enlarge) Some investors may have a much easier time visualizing the returns with graphs, so I grabbed a bar chart as well: (click to enlarge) I think the bar chart really drives this home. Even though XBI is using a very different portfolio structure than their index, they have extremely similar returns over each time period. When I check an ETF against their index, I usually expect them to slightly underperform because of the expensive ratio. They have trailed their index, but only by around .05% on an annualized basis which is very good when you consider that the expense ratio is .35%. If they can continue to deliver that performance over the next decade it will be a testament to the management doing a solid job of deciding which companies deserve to be overweight in the portfolio. Building the Portfolio The sample portfolio I ran for this assessment is one that came out feeling a bit awkward. I’ve had some requests to include biotechnology ETFs and I decided it would be wise to also include a the related field of health care for a comparison. Since I wanted to create quite a bit of diversification, I put in 9 ETFs plus the S&P 500. The resulting portfolio is one that I think turned out to be too risky for most investors and certainly too risky for older investors. Despite that weakness, I opted to go with highlighting these ETFs in this manner because I think it is useful to show investors what it looks like when the allocations result in a suboptimal allocation. The weightings for each ETF in the portfolio are a simple 10% which results in 20% of the portfolio going to the combined Health Care and Biotechnology sectors. Outside of that we have one spot each for REITs, high yield bonds, TIPS, emerging market consumer staples, domestic consumer staples, foreign large capitalization firms, and long term bonds. The first thing I want to point out about these allocations are that for any older investor, running only 30% in bonds with 10% of that being high yield bonds is putting yourself in a fairly dangerous position. I will be highlighting the individual ETFs, but I would not endorse this portfolio as a whole. The portfolio assumes frequent rebalancing which would be a problem for short term trading outside of tax advantaged accounts unless the investor was going to rebalance by adding to their positions on a regular basis and allocating the majority of the capital towards whichever portions of the portfolio had been underperforming recently. Because a substantial portion of the yield from this portfolio comes from REITs and interest, I would favor this portfolio as a tax exempt strategy even if the investor was frequently rebalancing by adding new capital. The portfolio allocations can be seen below along with the dividend yields from each investment. Name Ticker Portfolio Weight Yield SPDR S&P 500 Trust ETF SPY 10.00% 2.11% Health Care Select Sect SPDR ETF XLV 10.00% 1.40% SPDR Biotech ETF XBI 10.00% 1.54% iShares U.S. Real Estate ETF IYR 10.00% 3.83% PowerShares Fundamental High Yield Corporate Bond Portfolio ETF PHB 10.00% 4.51% FlexShares iBoxx 3-Year Target Duration TIPS Index ETF TDTT 10.00% 0.16% EGShares Emerging Markets Consumer ETF ECON 10.00% 1.34% Fidelity MSCI Consumer Staples Index ETF FSTA 10.00% 2.99% iShares MSCI EAFE ETF EFA 10.00% 2.89% Vanguard Long-Term Bond ETF BLV 10.00% 4.02% Portfolio 100.00% 2.48% The next chart shows the annualized volatility and beta of the portfolio since October of 2013. (click to enlarge) Risk Contribution The risk contribution category demonstrates the amount of the portfolio’s volatility that can be attributed to that position. You can see immediately since this is a simple “equal weight” portfolio that XBI is by far the most risky ETF from the perspective of what it does to the portfolio’s volatility. You can also see that BLV has a negative total risk impact on the portfolio. When you see negative risk contributions in this kind of assessment it generally means that there will be significantly negative correlations with other asset classes in the portfolio. The position in TDTT is also unique for having a risk contribution of almost nothing. Unfortunately, it also provides a weak yield and weak return with little opportunity for that to change unless yields on TIPS improve substantially. If that happened, it would create a significant loss before the position would start generating meaningful levels of income. A quick rundown of the portfolio I put together the following chart that really simplifies the role of each investment: Name Ticker Role in Portfolio SPDR S&P 500 Trust ETF SPY Core of Portfolio Health Care Select Sect SPDR ETF XLV Hedge Risk of Higher Costs SPDR Biotech ETF XBI Increase Expected Return iShares U.S. Real Estate ETF IYR Diversify Domestic Risk PowerShares Fundamental High Yield Corporate Bond Portfolio ETF PHB Strong Yields on Bond Investments FlexShares iBoxx 3-Year Target Duration TIPS Index ETF TDTT Very Low Volatility EGShares Emerging Markets Consumer ETF ECON Enhance Foreign Exposure Fidelity MSCI Consumer Staples Index ETF FSTA Reduce Portfolio Risk iShares MSCI EAFE ETF EFA Enhance Foreign Exposure Vanguard Long-Term Bond ETF BLV Negative Correlation, Strong Yield Correlation The chart below shows the correlation of each ETF with each other ETF in the portfolio. Blue boxes indicate positive correlations and tan box indicate negative correlations. Generally speaking lower levels of correlation are highly desirable and high levels of correlation substantially reduce the benefits from diversification. (click to enlarge) Conclusion XBI is an extremely aggressive allocation that easily brings in the heaviest level of risk in the portfolio. Despite being a major source of risk, the correlation with the S&P 500 is only .56% and the resulting beta is “only” 1.44 which is very good when you consider how volatile the ETF has been. The thing that may be even more interesting is what happens when investors run the regression over a longer period. When I extended the sample period back to February of 2006, the correlation goes up to .68 but the beta drops down to .91 because the ETF was dramatically less volatile in the earlier years. Lately the sector has been substantially more volatile. The strong performance of XBI also extends back quite a ways. Since February 2006 the ETF has returned over 400%. I also extended this sample by running another regression of returns on XBI against a long term government bond index. The negative correlation in that case came in at -.35 compared to the S&P 500 coming in at -.54. The risk that comes from the weaker negative correlation is that it makes it more difficult to really drive portfolio risk lower. However, for an investor that is willing to hold a portfolio that is already overweight on equities, it would seem perfectly reasonable to include XBI as an allocation. It is a highly aggressive allocation, but it has done very well. The one other interesting note that I would make in that regard is that it has shown a substantially higher correlation with international ETFs than with domestic equity. If you’re planning to run XBI as a large holding, you may want to consider reducing the international equity allocation.

IYR: This REIT ETF Has Some Great Holdings

Summary The portfolio construction of IYR is easy to admire. They took the risk of making the second heaviest weighting an equity REIT with extreme levels of operational leverage. They even incorporate a very small weighting to mREITs which further diversifies the portfolio. A heavy allocation to REITs makes more sense for investors that are weak on bond positions. Investors should be seeking to improve their risk adjusted returns. I’m a big fan of using ETFs to achieve the risk adjusted returns relative to the portfolios that a normal investor can generate for themselves after trading costs. One of the funds that I’m considering is the iShares U.S. Real Estate ETF (NYSEARCA: IYR ). I’ll be performing a substantial portion of my analysis along the lines of modern portfolio theory, so my goal is to find ways to minimize costs while achieving diversification to reduce my risk level. Expense Ratio The expense ratio on IYR is .43%. Compared to other domestic equity funds like the Vanguard REIT Index ETF (NYSEARCA: VNQ ) or the Schwab U.S. REIT ETF (NYSEARCA: SCHH ), that is painfully high. VNQ charges .12% and SCHH charges .07%. Because I love diversification at low costs, I’m holding both VNQ and SCHH in my personal portfolio. Largest Holdings (click to enlarge) A large position to Simon Property Group (NYSE: SPG ) is a fairly normal starting point for most REIT ETFs. The very interesting thing about this portfolio is that they are using American Tower REIT Corp (NYSE: AMT ) as the second holding. For investors that are not familiar with AMT, they are a global telecommunications REIT. When you place a call from your cell phone, you may be using the services AMT provides as they contract with cellular companies to lease usage of their cell phone towers. The REIT has a very weak dividend yield and from most pricing metrics it looks absurdly expensive. The reason investors have kept shares of AMT so expensive is because their structure incorporates an enormous amount of operating leverage. When they go from having one client to two clients for a cell phone tower the variable costs are extremely low while the revenue scales up substantially. This is an interesting play because most holders of a REIT index would be looking to use the position to grab some dividends and AMT has fairly weak dividends. On the other hand, AMT is one of three major companies in their very small sector and there is the potential for excellent returns. This is a play with high risk and high potential returns. The best way to make those kinds of high risk plays is within the context of a diversified portfolio, so it makes sense that it would get a significant allocation within an ETF. Simply put, this strategy makes more sense from a diversification perspective than it does when we are considering why the investor might initially choose to buy a REIT ETF. Sector Exposure This breakdown of the sector exposure reinforces what I was seeing in the initial holdings chart. The heavy position in specialized REITs suggests a goal of using the ETF structure to create a portfolio that is substantially less volatile than the underlying holdings. Overall, I like the strategy in the portfolio construction. While I’d like to see more breakdowns on the “specialized” sector, I have to admit that I really admire seeing the ETF work to incorporate other types of holdings such as mREITs. That sector is highly complex and I spend a great deal of my time explaining it to investors. If investors get their exposure through a very small allocation within a REIT ETF, that would be a solid way to prevent the common investor mistakes of buying high and selling low which seems to be extremely common in the mREIT sector. Building the Portfolio The sample portfolio I ran for this assessment is one that came out feeling a bit awkward. I’ve had some requests to include biotechnology ETFs and I decided it would be wise to also include a the related field of health care for a comparison. Since I wanted to create quite a bit of diversification, I put in 9 ETFs plus the S&P 500. The resulting portfolio is one that I think turned out to be too risky for most investors and certainly too risky for older investors. Despite that weakness, I opted to go with highlighting these ETFs in this manner because I think it is useful to show investors what it looks like when the allocations result in a suboptimal allocation. The weightings for each ETF in the portfolio are a simple 10% which results in 20% of the portfolio going to the combined Health Care and Biotechnology sectors. Outside of that we have one spot each for REITs, high yield bonds, TIPS, emerging market consumer staples, domestic consumer staples, foreign large capitalization firms, and long term bonds. The first thing I want to point out about these allocations are that for any older investor, running only 30% in bonds with 10% of that being high yield bonds is putting yourself in a fairly dangerous position. I will be highlighting the individual ETFs, but I would not endorse this portfolio as a whole. The portfolio assumes frequent rebalancing which would be a problem for short term trading outside of tax advantaged accounts unless the investor was going to rebalance by adding to their positions on a regular basis and allocating the majority of the capital towards whichever portions of the portfolio had been underperforming recently. Because a substantial portion of the yield from this portfolio comes from REITs and interest, I would favor this portfolio as a tax exempt strategy even if the investor was frequently rebalancing by adding new capital. The portfolio allocations can be seen below along with the dividend yields from each investment. Name Ticker Portfolio Weight Yield SPDR S&P 500 Trust ETF SPY 10.00% 2.11% Health Care Select Sect SPDR ETF XLV 10.00% 1.40% SPDR Biotech ETF XBI 10.00% 1.54% iShares U.S. Real Estate ETF IYR 10.00% 3.83% PowerShares Fundamental High Yield Corporate Bond Portfolio ETF PHB 10.00% 4.51% FlexShares iBoxx 3-Year Target Duration TIPS Index ETF TDTT 10.00% 0.16% EGShares Emerging Markets Consumer ETF ECON 10.00% 1.34% Fidelity MSCI Consumer Staples Index ETF FSTA 10.00% 2.99% iShares MSCI EAFE ETF EFA 10.00% 2.89% Vanguard Long-Term Bond ETF BLV 10.00% 4.02% Portfolio 100.00% 2.48% The next chart shows the annualized volatility and beta of the portfolio since October of 2013. (click to enlarge) Risk Contribution The risk contribution category demonstrates the amount of the portfolio’s volatility that can be attributed to that position. You can see immediately since this is a simple “equal weight” portfolio that XBI is by far the most risky ETF from the perspective of what it does to the portfolio’s volatility. You can also see that BLV has a negative total risk impact on the portfolio. When you see negative risk contributions in this kind of assessment it generally means that there will be significantly negative correlations with other asset classes in the portfolio. The position in TDTT is also unique for having a risk contribution of almost nothing. Unfortunately, it also provides a weak yield and weak return with little opportunity for that to change unless yields on TIPS improve substantially. If that happened, it would create a significant loss before the position would start generating meaningful levels of income. A quick rundown of the portfolio I put together the following chart that really simplifies the role of each investment: Name Ticker Role in Portfolio SPDR S&P 500 Trust ETF SPY Core of Portfolio Health Care Select Sect SPDR ETF XLV Hedge Risk of Higher Costs SPDR Biotech ETF XBI Increase Expected Return iShares U.S. Real Estate ETF IYR Diversify Domestic Risk PowerShares Fundamental High Yield Corporate Bond Portfolio ETF PHB Strong Yields on Bond Investments FlexShares iBoxx 3-Year Target Duration TIPS Index ETF TDTT Very Low Volatility EGShares Emerging Markets Consumer ETF ECON Enhance Foreign Exposure Fidelity MSCI Consumer Staples Index ETF FSTA Reduce Portfolio Risk iShares MSCI EAFE ETF EFA Enhance Foreign Exposure Vanguard Long-Term Bond ETF BLV Negative Correlation, Strong Yield Correlation The chart below shows the correlation of each ETF with each other ETF in the portfolio. Blue boxes indicate positive correlations and tan box indicate negative correlations. Generally speaking lower levels of correlation are highly desirable and high levels of correlation substantially reduce the benefits from diversification. (click to enlarge) Conclusion IYR has a great portfolio construction methodology for investors that want some diversified exposure to equity REITs. The dividend yield of 3.83% isn’t mind blowing, but it is higher than the yield on SCHH. Of course, investments in mREITs should help strengthen the dividend yield to make up for REITs like AMT that are priced based on expected future revenue growth combined with exceptional operational leverage. The only thing I really dislike in this ETF is that the expense ratio is just too high. I can’t justify paying that kind of expense ratio for a REIT ETF. If an investor is willing to put up with the huge expense ratio, they should take notice that the fund has a positive correlation with the long term bond portfolio in BLV. That can be difficult because investors would like to be able to use the negative correlations to hammer the portfolio volatility lower. On the other hand, the moderate correlation with the S&P 500 makes it a reasonable option for investors that intend to be running a portfolio that is very heavy on equities. I fall under that category. I run extremely heavy on equities and use a significantly higher allocation to equity REITs than I would if I were running a strong bond allocation.

REM: A Supplement To Give Your Portfolio More Yield

Summary REM has a high expense ratio, but it is superior to new investors picking mREITs simply on trailing dividend yield. The top holdings are fairly similar, but as we move down to the third holding we see some great diversification benefits. When REM “goes on sale” after a period of intense interest rate volatility, it is not really “on sale”. The mREITs within the portfolio suffer severe losses from volatility. Investors should use allocations like REM in a conservative manner to boost the total income on the portfolio. One option many yield starved investors might miss out on is the iShares Mortgage Real Estate Capped ETF (NYSEARCA: REM ). The ETF isn’t perfect, but it does quite a few things right and in my opinion it may be a substantially superior option to investors picking their own mortgage REITs if they do not understand the mortgage REIT business. An enormous portion of my coverage on Seeking Alpha is in the mortgage REIT sector and I’ve seen quite a few investors lose large chunks of money to being heavily invested in individual mREITs without understanding the accounting implications of management’s decisions. If an investor is willing to put in the time to learn the mREITs, I find that superior to the ETF option. If that seems like too much work, REM is an option with a massive 14.4% dividend yield. Expense Ratio The expense ratio on REM is .48%. Largest Holdings (click to enlarge) The holdings are not ideal in my opinion, but they aren’t bad. For the expense ratio, I would expect more investigation of which small cap mREITs are going to be underpriced and which mREITs will excel in the opposite scenarios. Annaly Capital Management (NYSE: NLY ) is a fairly huge Agency mREIT and their portfolio is fairly similar to the second holding, American Capital Agency Corp. (NASDAQ: AGNC ). The biggest difference in these two mREITs at the present time is the structure of their swap portfolios. NLY is hedging farther out on the yield curve and AGNC is using hedges with shorter durations but a higher notional value. If you want to learn more about either, I’ve covered both quite a few times. The nice thing about this portfolio is that it uses Starwood Property Trust (NYSE: STWD ) as the third holding. Starwood Property Trust is a huge REIT with vastly different risk factors from the simple Agency RMBS portfolios of NLY and AGNC. You can see my introduction to STWD . Overall, the portfolio of mREITs will be prone to one major weakness which is volatility in the interest rate environment. Some of these mREITs will benefit more from low rates and some from high rates, but very few mREITs are designed to benefit from volatility in the interest rate environment. If we go into a sustained period of fairly stable interest rates, it would be very bullish for the sector. Dividend Difficulties If there is volatility in the interest rate environment, it can result in very serious damage to both book value and earnings for mREITs which could force them to cut their dividend payouts. If you’re using REM to supplement your retirement, be aware that the dividend could be reduced materially and share prices falling when interest rates are volatile does not necessarily mean that the sector is “on sale”. Building the Portfolio This hypothetical portfolio has a moderately aggressive allocation for the middle aged investor. Only 25% of the total portfolio value is placed in bonds and a fifth of that bond allocation is given to high yield bonds. If the investor wants to treat an investment in an mREIT index as an investment in the underlying bonds that the individual mREITs hold, then the total bond allocation would be 35%. Given how substantially mREITs can deviate from book value, I’d rather consider the allocation as an equity position designed to create a very high yield. This portfolio is probably taking on more risk than would be appropriate for many retiring investors since a major recession could still hit this pretty hard. If the investor wanted to modify the portfolio to be more appropriate for retirement, the first place to start would be increasing the bond exposure at the cost of equity. However, the diversification within the portfolio is fairly solid. Long term treasuries work nicely with major market indexes and I’ve designed this hypothetical portfolio without putting in the allocation I normally would for equity REITs. An allocation is created for the mortgage REITs, which can offer some fairly nice diversification relative to the rest of the portfolio and they are a major source of yield in this hypothetical portfolio. The portfolio assumes frequent rebalancing which would be a problem for short term trading outside of tax advantaged accounts unless the investor was going to rebalance by adding to their positions on a regular basis and allocating the majority of the capital towards whichever portions of the portfolio had been underperforming recently. Because a substantial portion of the yield from this portfolio comes from REITs and interest, I would favor this portfolio as a tax exempt strategy even if the investor was frequently rebalancing by adding new capital. The portfolio allocations can be seen below along with the dividend yields from each investment. Name Ticker Portfolio Weight Yield SPDR S&P 500 Trust ETF SPY 35.00% 2.06% Consumer Discretionary Select Sector SPDR ETF XLY 10.00% 1.36% First Trust Consumer Staples AlphaDEX ETF FXG 10.00% 1.60% Vanguard FTSE Emerging Markets ETF VWO 5.00% 3.17% First Trust Utilities AlphaDEX ETF FXU 5.00% 3.77% SPDR Barclays Capital Short Term High Yield Bond ETF SJNK 5.00% 5.45% PowerShares 1-30 Laddered Treasury Portfolio ETF PLW 20.00% 2.22% iShares Mortgage Real Estate Capped ETF REM 10.00% 14.45% Portfolio 100.00% 3.53% The next chart shows the annualized volatility and beta of the portfolio since April of 2012. (click to enlarge) A quick rundown of the portfolio Using SJNK offers investors better yields from using short term exposure to credit sensitive debt. The yield on this is fairly nice and due to the short duration of the securities the volatility isn’t too bad. PLW on the other hand does have some material volatility, but a negative correlation to other investments allows it to reduce the total risk of the portfolio. FXG is used to make the portfolio overweight on consumer staples with a goal of providing more stability to the equity portion of the portfolio. FXU is used to create a small utility allocation for the portfolio to give it a higher dividend yield and help it produce more income. I find the utility sector often has some desirable risk characteristics that make it worth at least considering for an overweight representation in a portfolio. VWO is simply there to provide more diversification from being an international equity portfolio. While giving investors exposure to emerging markets, it is also offering a very solid dividend yield that enhances the overall income level from the portfolio. XLY offers investors higher expected returns in a solid economy at the cost of higher risk. Using it as more than a small weighting would result in too much risk for the portfolio, but as a small weighting the diversification it offers relative to the core holding of SPY is eliminating most of the additional risk. REM is primarily there to offer a substantial increase in the dividend yield which is otherwise not very strong. The mREIT sector can be subject to some pretty harsh movements and dividends from mREITs should not be the core source of income for an investor. However, they can be used to enhance the level of dividend income while investors wait for their other equity investments to increase dividends over the coming decades. If you want a really quick version to refer back to, I put together the following chart that really simplifies the role of each investment: Name Ticker Role in Portfolio SPDR S&P 500 Trust ETF SPY Core of Portfolio Consumer Discretionary Select Sector SPDR ETF XLY Enhance Expected Returned First Trust Consumer Staples AlphaDEX ETF FXG Reduce Beta of Portfolio Vanguard FTSE Emerging Markets ETF VWO Exposure to Foreign Markets First Trust Utilities AlphaDEX ETF FXU Enhance Dividends, Lower Portfolio Risk SPDR Barclays Capital Short Term High Yield Bond ETF SJNK Low Volatility with over 5% Yield PowerShares 1-30 Laddered Treasury Portfolio ETF PLW Negative Beta Reduces Portfolio Risk iShares Mortgage Real Estate Capped ETF REM Enhance Current Income Risk Contribution The risk contribution category demonstrates the amount of the portfolio’s volatility that can be attributed to that position. Despite TLT being fairly volatile and tying SPY for the second highest volatility in the portfolio, it actually produces a negative risk contribution because it has a negative correlation with most of the portfolio. It is important to recognize that the “risk” on an investment needs to be considered in the context of the entire portfolio. To make it easier to analyze how risky each holding would be in the context of the portfolio, I have most of these holdings weighted at a simple 10%. Because of TLT’s heavy negative correlation, it receives a weighting of 20% and as the core of the portfolio SPY was weighted as 50%. Correlation The chart below shows the correlation of each ETF with each other ETF in the portfolio. Blue boxes indicate positive correlations and tan box indicate negative correlations. Generally speaking lower levels of correlation are highly desirable and high levels of correlation substantially reduce the benefits from diversification. (click to enlarge) Conclusion REM offers investors exposure to a sector that has a fairly low correlation (less than .50) with the S&P 500. That low correlation combined with a strong dividend yield makes it an appealing option for many investors that do not understand mREIT accounting. When it comes to analyzing mREITs, the worst mistake I often see is investors buying on trailing dividend yield with only a cursory examination into whether the mREIT can sustain the dividend. It is a recipe for failure as share prices can drop sharply after an unsustainable dividend is cut. While the dividend yield is extremely strong, low prices are not necessarily indicative of “sales” because the damage to an mREIT portfolio from period of high volatility can be very material and the damage is generally permanent. When their assets are held at substantially more than par value due to favorable interest rates and the borrowers are paying off the loans at par value, the loss created is a real problem and does not simply correct itself in future periods. Limit the exposure, but using REM as a small part of a portfolio can work just fine. Compared to the presented portfolio, if an investor needed more yield I would contemplate dropping off FXG first and replacing it with more SJNK and then replacing some SPY with an ETF that emphasizes higher dividend yields and lower volatility.