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5 Buy-Ranked Real Estate Mutual Funds

Even though real estate has been through tough times recently, securities from this sector should continue to be an integral part of portfolios with a long-term horizon. Over the years, mutual funds from this category have continued to perform favorably. They offer a convenient method to invest in real estate because of low initial investment requirements and the advantage of professional management. Investors willing to hold long-term positions would do well to consider these funds as they add stability and bring steady returns to a portfolio. Below we will share with you 5 buy-ranked real estate mutual funds. Each has earned either a Zacks Mutual Fund Rank #1 (Strong Buy) or a Zacks Mutual Fund Rank #2 (Buy) as we expect these mutual funds to outperform their peers in the future. SSgA Clarion Real Estate N (MUTF: SSREX ) seeks income and capital appreciation. SSREX invests a lion’s share of its assets in real estate investment trusts (REITs). SSREX may also invest not more than 20% of its assets in non-REIT securities that are issued by real estate companies and may also allocate a small portion of its assets in equity and fixed income securities of companies other than real estate firms. The SSgA Clarion Real Estate N is a non-diversified fund and has a three-year annualized return of 10.8%. SSREX has an expense ratio of 1.00% as compared to category average of 1.34%. JHFunds2 Real Estate Securities 1 (MUTF: JIREX ) invests a large chunk of its assets in securities of companies from real estate sector, and REITs. JIREX primarily invests in equity securities including common and preferred stock. A maximum of 10% of JIREX’s assets may get invested in non-US real estate firms. The JHFunds2 Real Estate Securities 1 is a non-diversified fund and has a three-year annualized return of 10.3%. As of April 2015, JIREX held 50 issues with 10.72% of its assets invested in Simon Property Group, Inc. (NYSE: SPG ). Columbia Real Estate Equity Z (MUTF: CREEX ) seeks capital growth and high level of income over the long run. CREEX invests a majority of its assets in equity securities of real estate companies. CREEX may also invest in REITs including equity REITs, mortgage REITs and hybrid REITs. The Columbia Real Estate Equity Z is a non-diversified fund and has a three-year annualized return of 10.1%. Arthur J. Hurley is the fund manager and has managed CREEX since 2006. VY Clarion Real Estate S2 (MUTF: IVRTX ) invests heavily in securities of domestic companies that are involved in real estate domain including REITs. IVRTX primarily focuses on acquiring common and preferred stocks of companies having market capitalizations more than $100 million. IVRTX may also invest in other derivatives such as convertible securities, IPOs, and Rule 144A securities. The VY Clarion Real Estate S2 has a three-year annualized return of 10.3%. IVRTX has an expense ratio of 1.08% as compared to category average of 1.34%. American Century Global Real Estate A (MUTF: ARYMX ) seeks high return through capital growth and current income. ARYMX invests a major portion of its assets in equity securities of REITs and other real estate firms. Though ARYMX generally invest in companies from developed nations including the U.S., ARYMX may also invest in companies located in emerging countries. A minimum of 40% of ARYMX’s assets get invested in foreign companies. The American Century Global Real Estate A is a non-diversified fund and has a three-year annualized return of 12.1%. As of March 2015, ARYMX held 73 issues with 3.87% of its assets invested in Simon Property Group, Inc. Original Post

3 ETF Winners And A Loser Post Fed Meeting

The latest Fed meeting was arguably the most closely eyed one in quite some time, as investors highly wagered on a September timeline liftoff for the first rate hike in nine years. Expectations of strong cues on the looming policy normalization were not washed away as the meeting was pretty meaningful and informative for the global asset classes. First of all, the Fed appeared pleased with the pickup in the U.S. economic growth in the second quarter of 2015, but not overenthusiastic. The Fed sees the current momentum as ‘ moderate ‘. Job growth numbers and an uptick in housing data were reasonably satisfactory but sluggish business fixed investment and net exports were the causes of concerns for the Fed. Inflation is still short of the Fed’s longer-term target due to the free fall in energy prices last year and declining prices of non-energy related imports, per the Fed minutes. The Fed expects the price index to remain under pressure in the near term, though it will perk up in the medium term. The Fed made it clear that it is well on its way to tighten the policy some time this year, but to reciprocate to this lukewarm economic recovery, it indicated a slower pace of rate hike when the step is actually taken. Added to this, the Fed slashed its projection for the benchmark interest rate for 2016 and 2017, though the guidance for the ongoing year was kept unchanged. The median estimate for 2016 was cut to 1.625% from 1.875% guided in March, and for 2017, it was reduced to 2.875% from 3.125% projected in March. If this was not enough, the Fed lowered the expectation for real GDP for 2015 to 1.8-2.0% from 2.3-2.7% guided in March. Market Impact The reductions combined prompted some big moves in various markets and asset classes as traders started to adjust their positions according to the Fed’s actions. The U.S. dollar was among the big movers as it slipped to a three-week low following the cut in longer-term U.S. interest rates forecast, per Bloomberg. Yield on the benchmark 10-Year U.S. Treasury note remained 2.32% for the last two days (ended June 17, 2015) mostly due to ‘Grexit’ worries which suddenly bolstered the appeal for the safe haven assets despite rate hike concerns in the U.S. In the fixed income market, short-term bonds were among the gainers. Below we discuss a few ETFs which were among the biggest movers after the Fed minutes and could remain in focus as there appears no maddening rush to normalize interest rates. Dollar – The Loser PowerShares DB USD Bull ETF (NYSEARCA: UUP ) This fund is the prime beneficiary of the rising dollar as it offers exposure against a basket of world currencies. These include the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. This is done by tracking the Deutsche Bank Long US Dollar Index Futures Index Excess Return plus the interest income from the fund’s holdings in U.S. Treasury securities. Needless to say, the fund underperforms in a falling dollar scenario. In terms of holdings, UUP allocates nearly 58% in euro and 25% together in Japanese yen and British pound. The fund has managed an asset base of $1.42 billion so far and it sees an average daily volume of 3 million shares. It charges 75 bps in total fees and expenses. Due to intense selling pressure, this dollar ETF was down about 0.9% at the close of trading on June 17, 2015 and lost over 1% after hours. The Gainers Gold Mining – Market Vectors Gold Miners ETF (NYSEARCA: GDX ) As soon as the greenback dips, commodity prices rise. Gold, one of the key precious metals, has emerged from the slump. SPDR Gold Shares (NYSEARCA: GLD ) tracking the gold bullion added about 0.5% (as of June 17, 2015), while the largest big-cap gold mining ETF, GDX , added about 2.9% on the same day. The latter saw more gains as it often trades as a leveraged play on gold. However, investors should note that the gains were short-lived as both ETFs were down after hours. GDX fell 0.4% while GLD lost 0.1% after the market closed. GDX is one of the popular gold mining ETFs in the market today with assets of $6.04 billion and a trading volume of roughly 35 million shares a day. The fund charges an expense ratio of 53 basis points a year. GDX is heavy on Canada with more than 50% focus. Short-term Treasury – iShares 1-3 Year Treasury Bond ETF (NYSEARCA: SHY ) The reduction in rate projections and a somewhat soft tone of the Fed regarding the rate hike made short-term Treasury ETFs a winner. This fund tracks the Barclays U.S. 1-3 Year Treasury Bond Index and holds 98 securities in its basket. The fund has an average maturity of 1.84 years and effective duration of 1.82 years. SHY is the most popular and most liquid ETF in the short-term bond space with AUM of $8.74 billion and average daily volume of more than 1.4 million shares. Expense ratio came in at 0.44% and its yield stands at 0.44%. The fund was up 0.02%. Emerging Market Dividend – ALPS Emerging Sector Dividend Dogs ETF (NYSEARCA: EDOG ) An indication of a sluggish trail of rate hike made emerging markets ETFs strong performers, while the dovish policy (presumably) brightened the dividend investing theme. This fund applies the ‘Dogs of the Dow Theory’ on a sector-by-sector basis. It reflects the performance of the emerging market equities with above-average dividend yields. The fund gives investors roughly equal exposure to all the sectors. This approach results in a portfolio of about 50 stocks with each security accounting for less than 2.79% of total assets. EDOG has accumulated $12 million in AUM. It charges 60 bps in annual fees and has an annual dividend yield of 3.79%. The fund was up 1.17% on June 17, 2015. Original Post

3 Utility ETFs Suffering From Rate Hike Worries

Banking on strong recovery in the U.S. economy, analysts are expecting a possible rate hike in September or October this year. Meanwhile, rate hike worries have been weighing on the major benchmarks. Recently released economic data including construction spending, auto sales and job number all came in on the strong side. These have elevated the rate hike possibility further. Strong Economic Recovery After having a dull first quarter, the economy rebounded strongly in the second as indicated by several economic data. The Fed also remained optimistic about a recovery in the second quarter based on strong labor and housing data. According to the U.S. Labor Department, the U.S. economy created a total of 280,000 jobs in May, witnessing the largest job addition since December 2014. Though the unemployment rate marginally rose to 5.5% in May, the rate is expected to decline gradually to Fed’s target this year. The average hourly wages also witnessed a strong year-on-year gain of 2.3%. Among other major economic data, the U.S. Department of Commerce reported that construction spending surged 2.2% in April, its fastest pace since May 2012. Also, most of the major housing data showed that the housing market recovered strongly in April. Meanwhile, U.S. light-vehicle sales gained 1.6% year over year to 1.63 million units last month, witnessing its best May ever in terms of light vehicle sales. Rate Hike Worries Strong economic data indicates that the economy is back on track in the second quarter, leaving behind the first-quarter contraction. This raises the possibility of a rise in interest rates, which have been near zero since the 2008 financial crisis. Before deciding on a rate hike, the Fed will closely watch the labor market situation and the inflation rate. However, the Fed remained “reasonably confident that inflation will move back to its 2% objective over the medium term”. The evolving macro environment points toward a possible rate hike in the not-too-distant future. Stock market investors are finding this prospect somewhat discouraging, which has been showing up in the market’s daily activity in recent sessions. Higher interest rates can make stocks less appealing and especially so in the dividend space. In this scenario, sectors including utilities that are expected to be affected by a rate hike have suffered heavily in recent times. 3 Utility ETFs Suffering The Utility sector is one of the most rate-sensitive sectors due to its high level of debt. Utilities are capital-intensive businesses and the funds generated from internal sources are not always sufficient for meeting their requirements. As a result, the companies have to approach the capital markets for raising funds. As a result, a rising rate environment may have a negative impact on this sector. Here, we highlight 3 utility ETFs that have suffered in recent times on rate hike worries. PowerShares DWA Utilities Momentum Portfolio (NYSEARCA: PUI ) This fund provides exposure across 40 securities by tracking the DWA Utilities Technical Leaders Index. Nearly 40% of total assets are allocated to the top 10 holdings. Sector-wise, multi-utilities take the top spot at 37.7%, while electric utilities and gas utilities take the next two positions. PUI has amassed $31.9 million in its asset base while it sees light volume of around 9,000 shares a day. The ETF has 0.60% in expense ratio and has declined 3.7% over the past one month. Guggenheim S&P 500 Equal Weight Utilities ETF (NYSEARCA: RYU ) This fund follows the S&P 500 Equal Weight Index Telecommunication Services & Utilities, holding 36 stocks in its portfolio. It is well diversified across its holdings with none of the companies accounting for more than 3.2% of the total assets. The ETF has been able to manage $128.3 million in its asset base and is moderately traded with more than 58,000 shares per day. It charges 40 bps in annual fees and expenses. The product has declined 3.2% in the trailing one-month period. iShares U.S. Utilities ETF (NYSEARCA: IDU ) This ETF provides exposure to 61 firms by tracking the Dow Jones U.S. Utilities Index. The fund has amassed $583.3 million in its asset base while it sees a moderate volume of around 417,000 shares a day. The product is largely concentrated in the top 10 firms that collectively make up for half of the basket. About 52% of its assets are allocated to electric utilities. The ETF charges a fee of 43 bps annually and has lost more than 2.9% in the past one month. Original Post