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Wednesday, July 16, 2008
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Knock Out Yields of 21.5% with ETFs
-- By Nathan Slaughter

It's easy to feel pummeled by today's market.  But smart investors have started to realize the folly of continuing to get sucker-punched by only chasing growth stocks -- especially when there are nearly 150 exchange-traded funds (ETFs) paying double-digit yields, and some as high as 21.5%.     

The investors who've started buying into high-yield ETFs understand that sometimes you have to change your strategy if you want to succeed.  This is the essence of business, good investing -- and even boxing.  In fact, today's investors would be wise to take a page out of Muhammad Ali's playbook.  (Full Story Below)

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    Knock Out Yields of 21.5% with ETFs

     No one thought Muhammad Ali could come out of retirement to beat George Foreman.  After all, Big George had positively murdered Joe Frazier and Ken Norton, the only two men ever to beat Ali.  When Ali and Foreman stepped into the ring in Zaire in 1974, the ferocious-hitting Foreman got Ali on the ropes and just started pounding him.  Most people though Ali was done for. 

     They were wrong.  By the eighth round, Foreman was exhausted.  But Ali, despite being pummeled so hard for so long, still had a vast reserve of energy, and he turned on the speed, accuracy and raw power that the world had momentarily forgotten.  Foreman went down for the count, and the referee raised Ali's glove into the air, declaring him -- again -- the heavyweight champion of the world. 

     Ali had to change his approach.  He knew Foreman could hit, but he knew that he had stamina.  He saw through everything else, focused on those two critical traits and devised a simple strategy accordingly. 

     I bet a lot of investors feel like Ali did on the ropes while Foreman devastated him with punch after punch after punch.  They feel bloodied by the subprime meltdown and bruised by energy and commodity prices.  A few have quit the game.  Others just want it to be over.

     Well, that's understandable.  Simply profiting from rising prices can work nicely in bull markets, but it's a tough strategy to pull off when the bears are prowling Wall Street.  Trying to do so is a classic example of making things harder than they need to be.  There's no point in fighting a market downtrend.

     That doesn't mean you need to end the round, it just means you need to change your strategy.  If market conditions mean you can't juice your portfolio with capital gains, then it's time to change your focus to generating income from your investments.

The Benefits of Focusing on Income
    
     Why shift over to income now?  Companies that pay dividends tend to be very stable and represent mature industries, and many of them do business in non-cyclical sectors like utilities. These "defensive" companies pull in steady sales even when times are tough.

     History also shows that dividend-paying investments fare much better during bear markets. In the vicious three years of 2000, 2001 and 2002, the dividend-paying stocks in the S&P 500 actually rose +10.4%, while the non-payers sank -33.19%. And there have been plenty of 10-year periods where dividends provided the only return for the S&P 500.

     The choice is clear, right? You can take a chance and continue to bet against the market, or you can collect double-digit yields on investments with a history of weathering the storm.

     In fact, ETFs offer dozens outstanding choices for income investors. That's because high yields are the norm with ETFs, not the exception: As of mid-June, 148 ETFs sported 10%-plus yields.  Only 122 common stocks can make that claim. 

     And ETFs are especially convenient for retirees or others who depend on their investments for their income, as more than 500 ETFs pay distributions monthly rather than quarterly or yearly. 

     Take a look at these three high-yielding ETFs, all of which are generating a double-digit income stream:

  We found a "flexible" ETF yielding 12.0%.  This ETF has an impressive track record of adjusting its strategy to capture the best gains the market has to offer, whether that's in high-yield bonds, royalty trusts or other equities.  Its strategy -- which includes buying stocks with low P/E ratios while shorting stocks with high P/E ratios -- has really paid off over the last year.    

  Another appealing ETF invests only in real-estate investment trusts (REITs), entities that are required by law to pass along 90% of their earnings to shareholders.  Our favorite in this space owns a portfolio that's double-diversified by both property type and geography.  It's an approach that is paying off: It's yielding 14.8%.

  This ETF focused on Asian stocks, which owns mature, dividend-paying companies like telecoms, financials and utilities, among others, is paying a 21.5% yield.  That's not a typo: 21.5% is correct.  The fund has increased its dividend payout +200% in the past three years. 

          When the opening bell rings on Wall Street tomorrow, promise yourself you'll take the opportunity to think differently.  Remember Ali and Foreman's "Rumble in the Jungle" and focus your efforts on your eighth-round comeback, the chance to deploy your knockout income ETF strategy.

     And The ETF Authority can be next to you in the ring, providing the coaching you need as you seek the best places to put your money to work.  My research staff and I are working on an in-depth report that will show you the three best ways to profit from ETFs right now.

     This special report will reveal more on how to use ETFs to capture double-digit dividend yields -- including more information about some of my favorite picks -- and how to profit from today's most promising sectors and foreign markets. (Our favorite foreign chart-leader is an ETF focused on Brazil that has returned +838% over the past five years!)

     You can sign up to join my exclusive "V.I.P. list" at no charge and receive this ETF report the instant it's completed -- just visit this link.

     Thanks for joining me on my search for today's highest-yielding securities!



Nathan Slaughter
Special Guest Contributor, Global Dividend Opportunities
Chief Investment Strategist, The ETF Authority
GlobalDividends.com
839-K Quince Orchard Blvd.
Gaithersburg, MD 20878-1614

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