Safes For Every Situation

Vanguard Safest Investment

18 and just opened my ROTH IRA w/ VANGUARD, what can I expect?

I’m very new to investing. So please forgive me.

You don’t need to watch your ROTH like a hawk. They are mutual funds and they have advisers that monitor the fund based on the goals of the fund, so you don’t have to. At least once a year, you should evaluate the funds you are invested in to determine if it is still being handled the way you want it to.

An 18yo should NOT have there money in a money market. You will barely earn any interest. You have 40 years before you will need the money, you need to put it in a “growth” fund (not growth & income, if you aren’t comfortable with that much risk). When you get more money in the program, then you can start diversifying.

Also, now would be a great time to learn more about investing and the stock market. Check some books out of the libaray on it and read up. Have fun!

A Safe Investment!

United States Utility Exchange Traded Funds

One area of the economy is so basic that it’s often overlooked by investors.

However, we all use its products every day of our lives. Demand for them slows down during bad economic periods but never stops. Furthermore, they are legal monopolies. And their profit margins are guaranteed by local and state governments.

For all those reasons utility stocks have traditionally been considered so safe they’re most appropriate for widows and orphans who have no other source of income.

When investors think of “growth,” they never consider utilities. However, the demand for electricity, natural gas and water grows at least as fast as the population. The invention and spread of high tech gadgets from PCs to big screen TVs has fueled a tremendous surge in the use of electricity.

Utility companies do have disadvantages for investors. They’re capital-intensive. And the same regulatory agencies that guarantee their profit margins are subject to political pressures to reject rate hike requests and to force utilities to spend money on environmental considerations. Because of the fear of global warming, utilities are under pressure to find ways to reduce carbon emissions. Water utilities are faced with aging pipes and competition from bottled drinking water (but still provide the water for most showers, baths, dish washers, and clothes washers).

Therefore, as always, the safest course for investors is to diversify their utility portfolios. Three exchange traded funds make that simple and easy.

The first is iShares Dow Jones U.S. Utilities: IDU. IDU tracks the Dow Jones U.S. Utilities Index. It includes electric (about 75% of the total), natural gas, water, and multi-utility companies. It includes regulated utilities, unregulated merchant power generators, and unregulated independent power producers.

IDU’s top holdings are Exelon Corporation, Southern Company, Dominion Resources Inc, Duke Energy Corporation, FPL Group Inc, American Electric Power, PG&E Corporation, Public Service Enterprise GP, Entergy Corporation, and Spectra Energy Corporation. It owns a total of 76 companies. IDU’s expense ratio is 0.48%. Its distribution yield is 3.75%.

Vanguard Utilities ETF: VPU tracks the MSCI (Morgan Stanley Capital International) United States Investable Market Utilities Index. This is made up of large, medium sized, and small utility companies in the U.S. It includes electric, natural gas, and water utilities, and companies that act as independent producers or distributions of power. It includes both nuclear and nonnuclear utilities. Its SEC yield is 3.74%. Its expense ratio is 0.25%. VPU has eighty-eight holdings in total.

PowerShares Dynamic Utilities: PUI tracks the Dynamic Utilities Intellidex Index. That includes thirty utility stocks. Its expense ratio is 0.6%. Its distribution yield is 8.13%.

PUI’s top holdings are PG&E Corporation, Southern Company, Edison International, Public Service Enterprise Group Inc., PPL Corporation, Exelon Corporation, Sempra Energy, FPL Group Inc., Southern Union Co., and CenterPoint Energy Inc.

Therefore there is a lot of overlap among the three funds. Therefore, there’s no need for investors to buy shares in more than one of these ETFs. IDU is the most diversified and has the lowest expense ratio.

However, PUI now has the highest yield. That can change, however, so investors much check on current yields when they’re ready to invest.

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