2. Mega caps. Investors looking for less international concentration could consider global mega caps. Given the dominance of US markets, domestic companies account for 50% of the S&P 100 Global Index. The yield on this index is currently around 2.5%.
3. Preferred stocks. Finally, more cautious investors looking for bond proxies could consider preferred stocks. Though the upside associated with preferred stocks is obviously limited, preferred stock yields are still attractive at around 5.5%, roughly in-line with what high yield is offering. In addition, as the financial sector – the biggest sector weighting in most preferred indices – has stabilized, the volatility on this asset class has dropped.
These three alternatives are accessible through funds such as the iShares International Select Dividend ETF (IDV), the iShares Global 100 ETF (IOO) and the iShares U.S. Preferred Stock ETF (PFF).
Russ Koesterich, CFA, is the iShares Global Chief Investment Strategist.
The author is long IDV, IOO and PFF.