If there is a drawback to FGD, it is easy to spot: The large, combined weight to telecom and utilities, even if mainly of the foreign variety, implies some of level of vulnerability to rising interest rates. High-yield stocks, particularly from those sectors, are seen as sensitive to rising interest rates. Fortunately, most developed markets outside the U.S. are not expected to raise borrowing costs next year.
Even if higher interest rates permeated developed markets, FGD could benefit because it allocates nearly 41% of its weight to the financial services sector, more than double its second-largest sector weight.
“The fund’s year-to-date return of 15.7% through Dec. 12 trails the S&P 500’s 21.1% gain. Its average annual returns over the longer haul also lag the benchmark index. But its 3.9% annualized dividend yield is well above the S&P 500’s average 1.8% payout,” according to IBD.
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