Funds & ETFs 826

Here area a variety of Funds and ETFs to help diversify your portfolio.

Vanguard Growth Index Fund ETF Shares (VUG) | Daily Alert January 17

Vanguard Growth Index Fund ETF Shares (VUG) employs full replication of the CRSP U.S. Large Cap Growth Index. CRSP defines large cap stocks as those in the largest 85th percentile of the market. It further delineates those stocks based on numerous growth and value characteristics. It allocates half of assets to stocks with the strongest growth characteristics to the above index.

The index is market capitalization weighted, meaning the index, and the fund, emphasizes established growth companies. The fund holds 280 stocks, which is a wide diversification. However, the market capitalization weighing process results in a concentration in its top holdings: Recently, 41% of assets were invested in the top ten names. The fund tends to be 13

heavy in certain sectors, notably technology. But that is not out of line with the fund’s peers, which also tend to overweight technology and underweight slower-growth sectors such as energy and financial services. Vanguard Growth’s top holdings have been major contributors to overall returns. In 2019, Vanguard Growth ETF returned 37.3%, outpacing nearly 90% of the Morningstar large growth category.

Brian W. Kelly, Moneyletter,, 800-890-9670, January 2020


Global X NASDAQ 100 | Daily Alert January 24

One of my loyal subscribers pointed out that the Global X NASDAQ 100 Covered Call ETF (QYLD) might be nearly as safe as a short- term bond fund while offering an 8% to 10% yield. I have never traded options, but I do know about ETFs, and this appears to be a solid one. QYLD has almost $1B in assets, it’s less volatile than the market, and has a reasonable 0.60% expense ratio. It is sponsored by Global X, a 10-year old business managing over 70 other ETFs. The QYLD ETF makes its money by owning the stocks in the NASDAQ 100 Index and then selling call options on the index. Without getting too far into the weeds, this strategy provides a way to earn income from an index that is known as a vehicle for growth while mitigating the down-side risk, all while reducing volatility and maintaining good diversity. This ETF will be viewed as a proxy for our cash and will not be on the 30-month ladder like our stock positions. If there is a flurry of splits, I won’t hesitate to sell off QYLD to allow us to get back to the “normal” 30 stock portfolio that we have been missing for a while now.

Neil Macneale, 2 for 1 Stock Split Newsletter,, 408-210-6881, January 2020


CBOE Vest S&P 500 Dividend Aristocrats Target Income Index ETF (KNG)

It’s time to step things up a notch—to put you into a fund that’s generating income “fit for a king.” I’m talking about the CBOE Vest S&P 500 Dividend Aristocrats Target Income ETF (KNG, Rated “C-”).

KNG is a newer, $48 million ETF sponsored by CBOE Vest Financial LLC with a unique strategy. It owns shares of S&P 500 companies that have proven to not just pay, but raise, their dividends steadily and consistently for a quarter century. You heard that right: 25 years! Only around 50-60 S&P companies have been qualifying recently. In early January, the most heavily weighted stocks in the ETF hailed from a diversified mix of sectors. They included drug makers like Abbvie (ABBV, Rated “C”) and Johnson & Johnson (JNJ, Rated “B”), data provider S&P Global (SPGI, Rated “B-”) and toolmaker Stanley Black & Decker (SWK, Rated “C”).

But KNG doesn’t just collect the generous payouts from these appropriately named dividend aristocrats. The ETF also employs a “covered call writing” strategy, writing (or selling) call options on up to 20% of each stock holding. If you’re not familiar with how it works, here are some quick basics:

A call option gives its holder the right, but not the obligation, to buy an underlying stock at a specified price before a certain expiration date. Each options contract covers 100 shares of any given security, known as a round lot. When you write a call option, you receive an upfront payment—or premium—from the buyer. Effectively, you give up the right to some degree of stock price appreciation. But you get a payment up front for your trouble.

This strategy helps generate income. When you layer that income on top of the more-generous dividends that aristocrat companies pay out, you get a nice, juicy, market-beating yield. KNG’s recent yield was almost two-and-a-half-times the 1.7% yield offered by the SPDR S&P 500 ETF Trust (SPY, Rated “C+”). Plus, you can still benefit from capital appreciation in a rising market (though at a somewhat reduced rate). AND you have some downside protection in a falling market, thanks to the cushion provided by those options premiums.

Add it all up and you can see why this month, I recommend you buy a 5% position in KNG at a price of $47.25 or better.

Mike Larson, Safe Money Report, 1-877-934-7778,, January 2020


Direxion Daily MSCI Mexico Bull 3X Shares Direxion Daily MSCI Mexico Bull 3 (MEXX)

While the Mexican economy has not been particularly strong, its stock market is in a nice uptrend and the two trade deals, together with cost advantages, work in Mexico’s favor for several reasons.

First, China’s rise as the world’s largest manufacturer over the last few decades has been a major headwind for Mexico. We know that thousands of American firms moved manufacturing operations to China. This trend hit Mexico doubly hard since Mexican firms moved operations to China too and American firms chose China over Mexico as a manufacturing destination.

But now, with Mexico’s wages lower than China’s, Mexico has become the low-cost manufacturing base of choice—especially for North American markets. And while I realize we all want more U.S. manufacturing jobs, please keep in mind that Mexican exports to America already contain 40% U.S. content while Chinese exports to America have only 4% U.S. content.  In other words, a washing machine assembled in Mexico and exported to America has about 40% of its components made in America.

In sharp contrast, for products assembled in China and then exported to America, only 4% of the content is made in America. Think an iPhone, for example. Almost all of its components are sourced in Asia. So, U.S. imports of Mexican products are 10 times better for American workers when compared with Chinese imports.

Improved investment and trade in Mexico could reduce some immigration pressures by creating better jobs in Mexico and America while also expanding U.S. exports to Mexico and South America. And with the new NAFTA deal passing Congress, a cloud of uncertainty has been lifted. Analysts are calling it “near shoring,” “in shoring” or “reverse globalization.”

The U.S. is already the biggest foreign direct investor in Mexico, accounting for 45% of all foreign investment, according to the State Department.

How will all this shake out and what will American Congressmen (and U.S. labor groups) think of U.S. multinationals shifting some manufacturing from China to Mexico?

American firms still export three times as much to Mexico as they do to China. And Mexico, in turn, sends 80% of its exports back across U.S. borders. In comparison, Mexico’s exports to its giant neighbor to the south, Brazil, accounted for only 1% of its total exports. Mexico has also launched more free-trade agreements that involve in excess of 40 countries—more than any other country and enough to cover more than 90% of the country’s foreign trade. Another plus is Mexico’s very favorable demographics, where almost half of the country’s population is what we would term working age, and 27% of Mexicans are under the age of 14. Most importantly, Mexican stocks are in a clear uptrend.

To gain direct and broad exposure to Mexico’s stock market, one could go with the Mexico iShares exchange-traded fund (ETF), which trades under the symbol (EWW).

But I recommend going with the bolder, more aggressive Direxion MSCI Mexico 3X Bull ETF (MEXX), which follows a basket of leading Mexican stocks but seeks to move three times (300%) the daily price change in the index—both up and down.

Because of that volatility, I suggest a 20% trailing stop-loss on this idea. BUY A HALF POSITION.

Carl Delfeld, Cabot Global Stocks Explorer,, 978-745-5532, January 23, 2020


*Fidelity Magellan Fund (FMAGX) and Fidelity Independence Fund (FDFFX)

Last month Sammy Simnegar became the sole manager of Fidelity Magellan Fund (FMAGX) (and its smaller clone Fidelity Independence Fund (FDFFX)). He is also the highly successful manager of Fidelity International Capital Appreciation Fund (FIVFX).

Outpacing the S&P 500 through almost all of 2019 (Magellan basically matched the index at year-end with a return of 31.2% versus 31.5%), a major course-correction in the fourth quarter weighed on its overall performance. On the other hand, Magellan is now better positioned to capitalize on the market’s fastest-growing and most promising stocks.

With portfolio turnover shooting up from 40% a year ago to 124%, today, Magellan and Independence are much more like Fidelity’s other large-cap growth funds, and less like the S&P 500 Index.

Based on Sammy’s track record and, most importantly, the changes he’s initiated at Magellan (and Independence), we’ve upgraded these newly refashioned large-cap growth funds to OK to Buy.

Jack Bowers, John M. Boyd and John Bonnanzio, Fidelity Monitor & Insight,, 800-397-3094, February 2020


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