The Risks Of Chasing High-Yield ETFs

Global economic uncertainty coupled with a persistent low interest rate environment may push investors towards riskier investments in search of a better yield.  Those investors may now be discovering the hard way the risks that come with chasing those yields.

Two areas that investors may have gone yield reaching are REITs and MLPs.  REITs haven’t done too poorly this year as those higher yields have kept these ETFs roughly on pace with the S&P 500 but those who went into MLPs have gotten hammered.  The ALPS Alerian MLP ETF (AMLP) is down almost 20% year-to-date and the underlying Alerian MLP Index is down almost 30%.

Global X launched the SuperDividend group of ETFs with the intention of appealing to the high dividend seeking crowd.  The Global X SuperDividend ETF (SDIV) was launched just a couple of years ago and had done pretty well through the middle of 2014.  Since then, the fund has lost about 14% of its value and was down as much as 20% at the end of September.