I wanted to take a few minutes tonight to compare two ETF’s that find their way on to every dividend growth investor’s radar, at some point. At first glance, the two ETF’s seem very similar but are they different? Is DGRO or DGRW the better ETF?

In today’s post we’re going to compare DGRO v DGRW in a heads up battle for the true D-Grow ETF. Let’s get into it.

But first, I hold one of these ETF’s myself. Which one did I think was the best? Check out my Unqualified Investors Portfolio.

Post Agenda

• DGRW Investment Strategy
• DGRO Investment Strategy
• DGRO v DGRW Returns Compared to the S&P 500
• Pros & Cons to DGRW
• Pros & Cons to DGRO
• DGRO v DGRW Key Considerations

DGRW Investment Strategy

DGRW – WisdomTree U.S. Quality Dividend Growth Fund

WisdomTree employs a unique investment philosophy with regard to dividend or dividend growth investing. Rather than focusing, as others do, on just the dividend history, they emphasize a return on equity(ROE) and a return on assets(ROA). Their aim is to find stocks with the potential for future dividend growth. The primary thought is that by focusing on these reliable criteria they may be able to avoid assets simply growing the dividends alone. Thus eliminating assets that may face potential dividend cuts or suspensions.

Additionally, DGRW maintains an above average technology sector allocation. A trait not inherent to other dividend growth ETF’s. With over 30% allocated to technology stocks DGRW hopes to take part in substantial gains within that sector of the market.

DGRO Investment Strategy

DGRO – iShares Core Dividend Growth ETF

IShares follows a more traditional approach to dividend growth investing. They target companies with at least a 5 year dividend growth track record and below 75% of earnings being paid in dividends. This approach to dividend growth investing seeks to find assets offering steadily increasing dividends at a sustainable level.

However, unlike DGRW, DGRO does little to favor one sector over another. Largely the ETF maintains an S&P 500-like profile, allocating capital across a range of sectors equitably.

DGRO v DGRW Returns Compared to the S&P 500

When comparing DGRO v DGRW to the overall market over the previous 10 year period, both DGRW and DGRO have shown competitive performance.

• DGRW: 12.79% annualized returns
• DGRO: 11.49% annualized returns
• S&P 500: 13.46% annualized returns

From a longer term results perspective, investors would have still achieved a higher return investing into the S&P. However, for those needing the higher dividend yield or better yet, a growing dividend yield then both DGRW and DGRO offer a compelling argument. Still, in this instance, DGRW edged out DGRO in annualized returns over the previous 10 years.

DGRW – Pros & Cons

DGRW Pros:

• Focus on quality metrics such as ROE and ROA rather than just dividend increases.
• Higher allocation to technology sector.
• Lower maximum drawdown compared to the S&P 500.

DGRW Cons:

• Slightly higher expense ratio compared to DGRO
• May underperform during strong growth periods.

DGRO – Pros & Cons

DGRO Pros:

• Lower expense ratio compared to DGRW.
• Simpler dividend growth strategy with edge toward dividend sustainability.
• Broader, market-like exposure profile.

DGRO Cons:

• Marginally lower annualized returns compared to DGRW.
• Lower allocation to any specific market sector.
• Higher maximum drawdown compared to DGRW.

DGRO v DGRW Key Considerations

When considering either ETF investment it would be important to think about which strategy better suits you as an investor. Do you like the idea of investing into dividend growth companies based on their returns or through a more straightforward methodology? Both DGRO or DGRW offer investors exposure to dividend growth companies but how they reach that goal is substantially different. Historically, the edge in that department remains with DGRW.

Moreover, investors seeking a focus on quality growth metrics with higher allocation to tech stocks would probably favor the DGRW ETF. However, DGRO’s more traditional approach shouldn’t be discounted to heavily. It’s often said that if it isn’t simple enough to explain to a kid it’s probably too complicated. With DGRO an investor would have a lower expense ratio and an easy to understand investment philosophy.

In all, both ETF’s have a unique offering for investors to consider. Neither ETF has an expense ratio that should send us running for the hills so it really just comes down to which strategy is preferred. Personally, I prefer the higher starting yield with DGRO v DGRW’s lower initial yield. DGRW may ultimately provide more in terms of quote, unquote, dividend growth, but they lag DGRO’s current yield significantly.

In that light, DGRO is my preferred ETF in the DGRO v DGRW debate. Which is highlighted by the significant investment you can see in my Unqualified Investors portfolio.

Until the next post.

God bless,

Jeff

<p>The post DGRO v DGRW: Which Is the Best Dividend Growth ETF? first appeared on UQinvest.com.</p>

Now, on to discussing these two ETF’s. Are they the same? Is one better than the other?

In the world of ETF’s, SPY v SPLG stand out as two very popular options among investors seeking S&P 500 exposure. They both track the same benchmark but there are some distinct differences that may appeal to different types of investors. In today’s post I’ll be discussing several of their similarities or differences, along with some pros and cons to each ETF.

To begin our debate of SPY v SPLG, here are links to each funds website if you wish to review further.

• SPY – SPDR S&P 500 Trust ETF
• SPLG – SPDR Portfolio S&P 500 ETF

Additionally, here is a link to my Unqualified Portfolio that you may like to view. Currently, I hold SPLG but do occasionally trade in either SPY or the SPY options market. And for those new to growth investing here is a detailed guide I wrote on the topic; Growth Investing 101.

Post Agenda

• SPY Overview
• SPLG Overview
• Key Similarities
• Key Differences
• Expense Ratio Comparison
• Liquidity and Trading
• Risk and Volatility
• SPY Pros & Cons
• SPLG Pros & Cons
• Investor Suitability

SPY ETF Overview

SPY is often referred to as “the spiders” and is among the oldest, most well known ETF’s in existence today. In fact, it has become one of the largest and most liquid ETF’s in the entire world, with unmatched trading volume or liquidity.

SPY is passively managed and aim’s to replicate the performance of the S&P 500 index. The S&P 500 or simply, “the S&P” is a market-cap weighted index of 500 large-cap stocks, representing approximately 80% of the United States stock market.

SPLG ETF Overview

SPLG, in my opinion, is SPY’s little brother. However, in recent years has gained considerable popularity given their lower expense ratio. Essentially, making it a more cost effective option for investors wanting exposure to the S&P 500 index.

SPLG is passively managed and seeks to replicate the performance of the S&P 500 index as well.

SPY v SPLG Similarities

• Both SPY & SPLG invest in the same 500 companies that make up the S&P Index
• SPY & SPLG use a similar weighting ideologies
• Both ETF’s aim to provide investors with exposure to large-cap equities

SPY v SPLG Differences

• SPY is structured as a unit investment trust
• SPLG is structured as a typical ETF
• SPLG has a significantly lower expense ratio compared to SPY
• SPY has considerably higher trading volume compared to SPLG

Expense Ratio Comparison

The most notable difference investors will find between SPY v SPLG is the expense ratio.

• SPY – 0.09% expense ratio
• SPLG – 0.02% expense ratio

The lower expense ratio of SPLG can lead to remarkable cost savings over a long period of time. For perspective, on a $10,000 investment over 10 years (assuming 5% return CAGR) you’ll pay $124 to hold SPY and only $26 dollars for SPLG. Over 20 or 30 years the difference becomes even more pronounced.

Liquidity and Trading

Liquidity is simply the ability to buy or sell. It essentially means there are plenty of buyers or sellers at any given time. Further, highly liquid assets have narrower bid/ask spreads. The bid/ask spread can be explained as, at any given moment, the amount we could buy and sell the ETF for. For example, at 10:30am we may be quoted $605.34 bid to $605.36 ask. If I bought the ETF at the ask of $605.34 and then immediately sold it at the bid of $605.34 I would lose the $0.02 cents. Lesser liquidity would just widen that spread.

SPY Liquidity and Trading

SPY is well known for it’s incredible liquidity.

• SPY has narrow bid/ask spreads
• Ability to execute any size trade without issue
• Very suitable to short term strategies or institutional investors

SPLG Liquidity and Trading

SPLG has ample liquidity for most investors but does trail behind SPY.

• Slightly wider bid/ask spreads
• While possible, less frequently used for short term strategies
• Typically suitable for retail investors wanting to buy and hold

Risk and Volatility

No SPY v SPLG debate would be complete without a volatility or risk comparison. Both ETF’s do track the same S&P 500 index so their profiles are similar. Here is what the recent data suggests.

• SPY volatility – 4.07%
• SPLG volatility – 4.16%

The difference in volatility is almost negligible for most investors and is likely due to tracking or management errors within the fund itself.

SPY Pros & Cons

SPY Pros

• Unrivaled liquidity and trading volume
• Narrow bid/ask spread
• Most popular options market
• Popular ETF that is well known worldwide

SPY Cons

• Higher expense ratio compared to SPLG
• Slightly less tax-efficient than SPLG

SPLG Pros & Cons

SPLG Pros

• Lower expense ratio compared to SPY
• Slightly better tax efficiency
• Suitable for long term buy and hold investors

SPLG Cons

• Lower trading volume and liquidity
• Less popular options market

Investor Suitability

SPY Suitability

SPY ETF is generally better suited to active traders requiring unmatched liquidity or institutional investors moving large positions. Additionally, options traders can deploy every possible options strategy in existence or deploy exotic strategies at will. The options market is among the most liquid currently available.

SPLG Suitability

SPLG is ideal for the long term buy and hold investor wanting exposure to the S&P 500 index. Moreover, SPLG boasts a significantly better expense ratio for investors holding the fund over many years. SPLG has become a favorite among newer investors or investors preferring the more traditional ETF structure.

Final Thoughts

While the SPY v SPLG debate may continue on into the future, it seems clear to me that holding one over the other is mostly trivial and could only be determined by a few factors. If you’re looking for liquidity or a shorter duration investment then SPY is likely preferred. Additionally, since SPY is the most recognizable ETF in the world some of the most sophisticated traders are involved in that market. For a newer trader or investor wanting to cut their teeth with the big boys they really need not look elsewhere. Successful traders in this market can be reasonably confident they’re strategy or system is a capable one.

On the other hand, SPLG is emerging as quite the contender. With retail investors becoming more and more common SPLG has certainly garnered a respectable name across the industry. Should you be seeking a long term buy and hold investment then SPLG is the clear favorite with the lower expense ratio.

In the end, when considering SPY v SPLG the fund you choose will be dependent on what need is most important. Both ETF’s track the same index and as we’ve seen have similar risk profiles. Making the true determining factor for SPY v SPLG, speed vs longevity.

Until the next post

God bless,

Jeff

<p>The post SPY v SPLG: Which S&P 500 ETF is Right for You? first appeared on UQinvest.com.</p>

In the ever-changing world of ETF’s, investors are constantly seeking opportunities to maximize their returns while also managing their risk. Two ETF’s that have garnered significant attention recently are the NEOS S&P 500 High Income ETF (SPYI) and the ProShares S&P 500 High Income ETF (ISPY). Both funds aim to provide investors with high income from the S&P 500 index, but they employ different strategies. In this article, we’ll dive into the comparison of SPYI v ISPY, exploring their similarities, differences, and potential benefits for investors.

Post Agenda

• SPYI Fund Overview
• ISPY Fund Overview
• SPYI v ISPY Strategy Comparison
• SPYI Pros & Cons
• ISPY Pros & Cons
• Risk & Volatility
• Who is SPYI Appropriate for?
• Who is ISPY Appropriate for?

SPYI Fund Overview

SPYI is an actively managed ETF launched by Neos Investments. The fund’s primary objective is to generate high monthly income for investors while maintaining exposure to the S&P 500 index. SPYI employs a strategy that involves investing in the S&P 500. These holdings earn dividends and the income is enhanced with an options strategy.

ISPY Fund Overview

ISPY, on the other hand, is a passively managed ETF launched by ProShares. This fund tracks the performance of the S&P 500 Daily Covered Call Index. They seek to provide investors with high income through a combination of equity exposure and option premium.

SPYI v ISPY Strategy Comparison

When comparing SPYI v ISPY it’s important to understand the nuances of each fund. Let’s discuss several different characteristics of to highlight how each attempts to benefit investors.

SPYI’s Strategy

SPYI’s strategy is comprised of four main components;

1. Holding S&P 500 Stocks
2. Collecting Dividends
3. Covered Call Options Strategy
4. Long OTM Call Options

The fund sells call options on the S&P 500 index to generate additional income. However, they differentiate themselves by re-investing some of those proceeds into long out of the money call options. Most covered call funds in existence simply sell the calls to increase the income but SPYI attempts to capitalize on some of the upside beyond the short call by purchasing these additional calls.

ISPY’s Strategy

ISPY employs a covered call strategy but they do it through the use of swap agreements. Strong 2008 vibes anyone? Regardless, the strategy is pretty easy to understand, they;

1. Invest in S&P 500 Stocks
2. Sell Daily Call Options on the S&P 500 Index through swap agreements

ISPY seeks to follow the S&P 500 Daily Covered Call Index while also returning investors an above average income. Additionally, ISPY may receive dividends from their holdings. In all, the strategy is mostly straightforward, ignoring any risk from those swap agreements, the fund aims to generate a consistent income by selling covered calls on a daily basis.

SPYI Pros & Cons

No comparison would be complete with out a succinct list of pros and cons for a potential investor to consider. Below I’ve provided what I believe are several of the most important items for consideration.

Pros

1. Active Management could allow for future optimization
2. Additional upside participation, beyond the short call
3. Consistent monthly income
4. Tax Efficiency through the use of Index options
5. Diversified approach

Cons

1. Higher expense ratio – 0.68%
2. Additional complexity and management error
3. Limited historical data
4. Potential for underperformance
5. Reliance on the options market

ISPY Pros & Cons

Some of the factors affecting or contributing to SPYI are also present with ISPY. Both funds seek similar objectives, only through a different approach. The most notable, in my opinion, are listed below.

Pros

1. Lower expense ratio – 0.55%
2. Simpler Options Strategy
3. Stronger initial performance
4. Potential for lower volatility
5. Passive management may appeal to some investors

Cons

1. Swap agreements make me uncomfortable
2. Limited historical data
3. Less flexibility with passive management
4. Higher portfolio turnover from daily call options
5. Dependent on the S&P 500 Daily Covered Call Index

Risk & Volatility

To fully compare SPYI v ISPY, risk and volatility are important factors to consider. From a volatility perspective, ISPY exhibits slightly higher volatility day-to-day. As of this writing, ISPY has a daily average range of $.45 where as SPYI has a daily average range of $.39. Not a significant difference but certainly something to keep an eye on.

Neither fund is without it’s risk. Chief among those risks is the limited historical data available for both funds. Ideally, I think we’d all prefer to see how they perform during a bear market before contributing our limited capital. Still, from a return perspective, it’s hard to ignore ISPY’s commanding lead. As of tonight, ISPY has returned north of 12% in price appreciation compared to SPYI’s sub 7%.

In all honesty, no one knows how either fund will perform when the market eventually does roll over. Neither has been in existence long enough for this valuable data. On the surface, an argument could be made that additional income will buoy these funds compared to their growth focused peers. A feature both funds are eager to promote, but with such limited data the jury is really still out on how either ETF will perform.

Who is SPYI Appropriate for?

• Investors seeking income through active management
• Investors seeking income through options
• Investors wanting additional upside in a bullish market environment
• Investors prioritizing consistent monthly income

While each investor is different, I think these are some of the more important features for consideration.

Active management could be debated at length but the upside is a more flexible approach. Sure, this flexibility could lead to other problems but it could also lead to solutions to problems so I guess that knife always cuts both ways.

In all, SPYI is probably more suitable to someone wanting complete transparency. Their approach just seems more clear and isn’t clouded by whatever fully constitutes a swap agreement. Though, similarly, the strategies SPYI employs may be reason enough to avoid them just the same.

Who is ISPY Appropriate for?

• Investors preferring passive index based strategies
• Investors preferring more traditional covered call approach
• Investors seeking a lower expense ratio
• Investors prioritizing consistent monthly income

If you’re seeking a passive approach and wanting to avoid the cost of long out of the money options then ISPY could make sense. I personally feel more aligned with SPYI but I also hold ISPY. If you’re interested to see how each of these holdings is performing for me you can view my Unqualified Portfolio here.

Still, to date, ISPY has performed significantly better than SPYI and they also boast a lower expense ratio, I don’t see how anyone would argue with that.

Final Thoughts

Well that about wraps up our SPYI v ISPY comparison. Honestly, it’s getting confusing keeping up with all the new offerings in the income investment space. These two ETF’s specifically, confuse me on almost a daily basis given the similar symbols.

Regardless, I hold both investments and don’t have plans to dump either of them at this time. Both have provided a consistent and similar income. SPYI has returned slightly more in income but they’ve also performed slightly worse overall, so by total return ISPY is performing better.

In closing, to determine which ETF is more appropriate for you would come down to the features you prefer. If you want a lower expense ratio then ISPY is the clear winner. Should you prefer a higher level of income then I think SPYI is more acceptable. If you’re seeking higher total returns, you should probably consider other alternatives first, but in the SPYI v ISPY debate, ISPY is the winner.

God bless,

Jeff

<p>The post SPYI v ISPY: 1 Clear Winner between Two High-Income ETF’s first appeared on UQinvest.com.</p>