HNDL: Innovative Income Strategies for Challenging Yield Environments
By every measure, the U.S. stock market is in the midst of an impressive run. On a year-to-date basis, the S&P 500 has risen by 17.39%. We are not yet halfway through 2019, and this performance is already well above historical averages. Since the benchmark started trading as a composite of 90 companies in 1926, the S&P 500 has produced average annual returns of only 9.8%. Further complicating matters is the low-interest rate environment visible in most global economies. At 2.5%, interest rates in the U.S. are the highest they’ve been in over a decade. But this is still low by historical standards and this scenario is unlikely to change any time soon.
Traditionally, these types of low-interest rate environments create obstacles for anyone searching for reliable sources of income. In many cases, investors will set up annuities to receive a steady income stream. But this approach has its disadvantages, as annuities are largely illiquid and they are only as dependable as the institution (for example, the insurance company) that provides them.
As a stable alternative to annuities, the Strategy Shares Nasdaq 7HANDL Index ETF (NASDAQ: HNDL) is a new exchange-traded fund that offers real solutions to these problems. HNDL is the first fund specifically designed to provide investors with consistent monthly payouts, generating an elevated 7% annual distribution designed to sustain itself through uncertain market environments.
What ultimately sets the Strategy Shares Nasdaq 7HANDL Index ETF apart from its peers is its unique target distribution. This is particularly true in low-yield environments where investors have trouble finding steady sources of income. CDs and savings accounts typically pay 1% (or less) and investments in U.S. Treasuries don’t pay much better (generally 2% to 3%). Rather than simply owning a traditional stock portfolio, investors can avoid selling portions of their holdings in order to produce income levels that are equal to the fund’s distribution. It’s an innovative approach to help investors navigate overbought stock markets as they trade at record highs.
HNDL: Fund Strategy and Design
The Strategy Shares Nasdaq 7HANDL Index Fund’s portfolio achieves long-term growth and stability, through a blended approach comprised of nineteen components and roughly 20,000 individual underlying securities. This impressive collection of assets is evenly divided into two diversified portfolios: its Dorsey Wright Explore Portfolio and its Core Portfolio:
The Dorsey Wright Explore Portfolio generates elevated current income levels through a tactical allocation of assets in twelve categories: dividend equities, real estate investment trusts (REIT), master limited partnerships (MLPs), utility stocks, intermediate-term corporate bonds, Build America Bonds (taxable muni), mortgage-backed securities, preferred dividend stocks, active fixed income, covered calls, growth & income equities, and high-yield bonds.
The Core Portfolio balances these strategies through long-term exposure to U.S. equities and fixed-income (at allocations of 70% bonds and 30% stocks). As a result, the Strategy Shares Nasdaq 7HANDL Index Fund exhibits an optimal 70-30 structuring of the Sharpe Ratio (which measures likely returns per unit of potential risk). In this way, HNDL is designed to achieve maximum risk-adjusted returns through a portfolio of broadly diversified assets. Historically, this approach tends to avoid the deeper drawdowns associated with strategies which focus on concentrated asset pools as a way of generating income.
Yield Strategies Surpass Peers
Compared with other popular investment vehicles, the Strategy Shares Nasdaq 7HANDL Index Fund’s attractive 7% distribution presents an obvious opportunity for income investors in this challenging market environment. Traditional techniques of investment in government bonds, CDs, and savings accounts fail to provide even half its payout. Deficiencies can also be found in the First Trust Multi-Asset Diversified Income Index Fund (which offers a lower yield that fluctuates substantially over time) and the PowerShares CEF Income Composite Portfolio (which focuses heavily on one asset class and maintains an expense ratio of 2.07%).
Given its favorable payout ratio (0.95%) and ability to provide stable income, it is clear that the Strategy Shares Nasdaq 7HANDL Index Fund stands head and shoulders above its peers. Moreover, it is important investors understand that the 7% distribution is more stable than a simple dividend. It represents a consistent payout that is designed to avoid the unpredictable fluctuations found in traditional stock investments.
As YTD returns in the S&P 500 move far above annual averages and global interest rate levels remain subdued by historical standards, investors will need to be increasingly proactive in their efforts to secure stable income. The Strategy Shares Nasdaq 7HANDL Index Fund offers solutions to many of these problems, and its innovative design structure could help limit portfolio volatility in the event of a market downturn. In conjunction with its superior distribution payouts, these advantages make HNDL a highly attractive alternative in this challenging market environment.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes.