A different investment instrument

[actonyourown]

I have a small Roth IRA that I have invested a small amount in over the last few years.  It's usually just some money from my tax return I put into it, so it hasn't amounted to much.  A while ago (pre-MMM) I bought into the iShares U.S. Preferred Stock ETF (ticker: PFF).  I was wondering what the community thinks of this investment vehicle and if it has any place in a long-term investment portfolio or if I should sell and just put my money elsewhere?

I like the fact that it pays dividends monthly since I don't have a lot of extra money to put into this account, however, I could see this being better for someone in or near retirement using a small piece of their portolio to increase their returns.  There is no Vanguard equivalent I could find to this fund.

Dividends: paid monthly
Yield: 6.07%
Expense ratio: 0.47%

[Radagast]

I'll let you judge. Do you prefer a fund that has returns like bonds, but crashes and burns much worse than stocks?

[PaulMaxime]

I'll let you judge. Do you prefer a fund that has returns like bonds, but crashes and burns much worse than stocks?

Just curious, does that chart include reinvested dividends? That makes a big difference.

[Radagast]

Morningstar defaults to including automatic reinvestment of dividends when the first fund you enter is a mutual fund (but not an etf or a stock), so it should. You could double check with portfolio visualizer.

[triangle]

I think PFF is better suited to someone older who already has a large stash of money saved and is just looking to generate income from it.  If you are young and investing for 20-30 years down the road then I would probably avoid it, or only keep a small position. My understanding is that banks and other financial institutions make up a large portion of that index and banks are predicted to do well in a rising rate environment, where the common stock is expected to outperform their preferred shares.

[clumlee]

I LOVE prefs! I have it in my brokerage account, except I use $JPS. My investment philosophy is different than most in that I believe you want to live off your dividends/interest instead of using a SWR. If you crave dividends like I do, then prefs are a good tool in your portfolio- just don't make it your only one, though.