Nevertheless, PFXF does include a 31.1% tilt toward real estate investment trusts and the rest of the portfolio is comprised of utilities, industrials, materials, health and consumer names.
However, while preferred stocks provide investors with an attractive source of yields, the assets are vulnerable in a rising interest rate environment. If rates rise, the holdings must decline in price to elevate their yield to attractive levels. Furthermore, most preferred stocks are either perpetual or long-dated, which exposes investors to significant interest-rate risk.
While the Federal Reserve has maintained a low-rate policy in light of slowing economic growth and global uncertainty, investors will be watching closely for the Federal Open Market Committee meeting’s announcement next week on July 25.
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VanEck Vectors Preferred Securities ex Financials ETF