Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Etf Pff
Old 08-16-2007, 11:44 PM   #1
Thinks s/he gets paid by the post
Join Date: Jul 2003
Location: Pasadena CA
Posts: 2,674
Etf Pff

There is an ETF for preferred stocks, PFF, seems like a miserable performer, but maybe it has a future? I wonder two things, is this a different asset class to hold? And assuming it is in a tax deferred IRA, what would be the right time (yes, I know this is a timing question) to buy this type of asset?

T.S. Eliot:
Old men ought to be explorers
yakers is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-17-2007, 02:48 PM   #2
Recycles dryer sheets
Join Date: Jun 2007
Posts: 350
Preferred stocks are a weird beast, you get "almost but not quite" the yield of the corporate bond market, and "almost but not quite" the liquidation preference (all bond holders have superior claim to any equity holders). From what I've seen preferred stocks trade more like bonds but without all the coupon. I guess you can tell I'm not a huge fan.

I would personally be more inclined to invest in either a corporate bond ETF, or a dividend oriented equity ETF, but that's just me.

FinanceGeek is offline   Reply With Quote
Old 08-18-2007, 04:20 AM   #3
Thinks s/he gets paid by the post
ladelfina's Avatar
Join Date: Oct 2005
Posts: 2,713
I know virtually nothing about the preferred stock universe.. except that I got a $30,000 check (representing a 7.7% ann'l. return) yesterday after the preferred stock I held in a bank hosed by the Feds during the S&L debacle ("here, take on this other, failing bank and we'll back you up --OOOPS, no we won't!") finally definitively won its breach-of-contract case. The common stockholders got bupkis though they did have the opportunity to sell for 10 cents on the dollar a few years back to a speculator.

So in my case preferred stock was, well.. preferable!!

I don't know what the point of the ETF would be since I'd imagine what's important is more the underlying company than just the naked fact of whether the stock is preferred or not.

Also, there are many flavors of "preference" with differing characteristics.. and it depends on the particular case whether the preferred status is advantageous or detrimental to you tax-wise or otherwise.

Some argue that a straight preferred stock, being a hybrid between a bond and a stock, bears the disadvantages of each of those types of securities without enjoying the advantages of either. Like a bond, a straight preferred does not participate in any future earnings and dividend growth of the company and any resulting growth of the price of the common. But the bond has greater security than the preferred and has a maturity date at which the principal is to be repaid. Like the common, the preferred has less security protection than the bond. But the potential of increases of market price of the common and its dividends paid from future growth of the company is lacking for the preferred.
Advantages of straight preferreds posited by some advisers include higher yields and tax advantages (currently yield some 2% more than 10-year Treasuries, rank ahead of common stock in the case of bankruptcy, dividends are taxable at a maximum 15% rather than at ordinary income rates, as in the case of bond interest).
Preferred stock - Wikipedia, the free encyclopedia

PRO ETF: A Call For a Preferred Stock ETF (PEY, FDL) - Seeking Alpha
CON ETF: Preferred Stock ETF? No Thanks. - Seeking Alpha
ladelfina is offline   Reply With Quote
Old 08-18-2007, 08:32 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: May 2005
Posts: 11,453
Have not read the articles, so maybe am saying what they say (or am completely wrong)...

As someone mentioned... they are below bonds and above common in a bankruptcy which is important if you happen to own that company...

They usually pay a bit more than bonds...

There are (to be simple) two major kinds... the ones that look like bonds and the ones that look like common stock... The latter are convertible preferred.. they are preferred with an equity kicker... they will allow you to buy common stock at a given price that is usually much higher than it was when the PS was issued... So, say the common is at $10/shr... they might allow you to buy X shares at $20/shr. Now, you will not buy unless the stock goes above the $20... but if it does, you now have the risks/rewards of the common...

The other just pays dividends and pays off when it is done... not up side to owning them except for the slight increase in income...
Texas Proud is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Mutual Fund to ETF/ Index mapping website ? Delawaredave FIRE and Money 23 11-26-2008 07:39 PM
Thoughts on improving a lazy ETF portfolio FinanceGeek FIRE and Money 12 08-14-2007 03:20 PM
New ETF: Sudan-Free social ETF Olav23 FIRE and Money 2 06-28-2007 09:03 AM
Emerging Mkts Fund - should I switch to ETF? kaudrey FIRE and Money 2 03-20-2006 07:57 AM
ETF questions: international & microcaps Nords FIRE and Money 9 08-18-2005 06:24 PM


All times are GMT -6. The time now is 08:33 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.