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
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
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%
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.