Financial Preferred ETFs

by Jay Pestrichelli on March 6th, 2012

Last week on this blog as well as for our ETF Strategies newsletter we talked about ways to enter the financials sector. Some of the symbols we highlighted were the preferred ETFs PFF, PGF, PGX.

Well wouldn’t you know it, SmartMoney also did a write-up about these ETFs in their March issue. If you subscribe to SmartMoney here’s the link to the write-up Preferential Treatment in an ETF.

The summary is that while preferred shares provide many advantages like lower smaller swings in price and higher dividends, they aren’t easy for individuals to get their hands on them. Well low and behold, these ETFs get you the exposure to a fund that is close to 100% dedicated to the financial sector and has healthy dividends.

What we add to the conversation is that 2 out of 3 of these ETFs also have options that trade on them. PFF for example has a healthy options market and is easily and affordably hedged with married puts. Let’s face it, if you’re going to get into the financials right now, then be sure to follow Rule #1 and hedge it like you do every other investment.

We think using these ETFs is a safer and more conservative way of gaining exposure to the financial sector; and were not alone. PFF actually has more assets under management than the popular SPDR Financial ETF: XLF.

Happy Hedging!


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