Harry Domash's Winning Investing

Best ETFs For Long Term Returns

I recently spotlighted five mutual funds that had consistently outperformed the overall market over the last 12-months, as well as over the past three- and five-years. My goal was to pick currently outperforming funds that won't turn cold right after you buy them. Instead, they should be likely to continue their winning ways. Here, I’ll do the same thing for exchange-traded funds (ETFs).

ETFs and conventional mutual funds are similar in that both track the performance of a relatively large number of stocks, creating automatic diversification and relieving investors of the task of analyzing individual stocks.

ETFs: Easier to Trade

However, ETFs are easier to trade. You buy them just like stocks and can trade them as often as you’d like. By contrast, mutual funds only trade once daily, after the market closes. Further, most enforce minimum holding periods before you can sell, have minimum purchase requirements, and trading costs are often higher.  

ETFs Can Be Better Than Mutual Funds

All that said, you’d think that you’d get better returns from mutual funds. Most are actively managed by professionals who can react to changing market conditions. By contrast, ETFs typically track fixed indexes that are only updated quarterly or semi-annually.

Best long-Term ETFs

By that’s not necessarily the case. Here are five ETFs generating returns as good, or better, than the mutual funds that I described before.

Guggenheim Consumer Staples

Guggenheim S&P 500 Equal Weight Consumer Staples (RHS): Tracks a 36 stock index comprised of U.S.-firms in the food and beverage, household products, personal products, and tobacco industries. Biggest holdings include Mead Johnson Nutrition, Monster Beverage, and Sysco Corp. The fund has returned 17% over the past 12-months, as well as 17%, on average annually, over the past three and five years. Pays quarterly dividends equating to a 1.6% dividend yield.

PS Dividend Achievers

PowerShares High Yield Equity Dividend Achievers (PEY): Tracks an index of the highest yielding large-cap stocks that have increased dividends annually for at least 10-years. Biggest holdings include Vector Group, ONEOK, and Helmerich & Payne. Returned 19% over 12-months, and 18% and 16% on average, annually, over three and five years. Pays monthly dividends, 3.3% yield.

Pimco US Treasury

Pimco 25 Plus Year US Treasury (ZROZ): Tracks index of Treasury STRIPs, which are derivatives of U.S. Treasury bonds sold at discounts and not entitled to interest payments, only to principal repayments when the notes are due. Relatively volatile; returned 22% over the past 12-months, and 15% on average annually, over the past three and five years. Pays quarterly dividends, 2.6% yield.

PS S&P Low Volatility

PowerShares S&P 500 Low Volatility (SPLV): tracks the 100 least volatile stocks in the S&P 500. Biggest holdings include AT&T, Waste Management, and Coca Cola. Returned 13% over the past 12-months and 13% and 14% over three and five years. Pays monthly dividends, 2.1% yield.

PS SmallCap Utilities

PowerShares S&P SmallCap Utilities (PSCU): Tracks 20 natural gas utilities and telecom stocks in the S&P SmallCap 600. Biggest holdings: Piedmont Natural Gas, Southwest Gas, and Spire (formerly Laclede Group). Returned 29% over 12-months, and 18% and 14% over the past three and five-years.

Pimco 25 Year US Treasury and PowerShares S&P SmallCap Utilities are both lightly traded. In those situations, it’s best to specify “Buy Limit” prices (maximum buy price) when purchasing.

Published 7/27/16

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