Courtesy of John Nyaradi.
Courtesy of Benzinga
On a day when markets are soaring due to some positive economic data here in the U.S., some investors may be thinking that the real estate market is finally turning the quarter. It’s probably too early to make that call, but now could be the time to at least start prepping for a rebound in the mortgage market.
Betting on the mortgage market is tricky to say the least. The financial crisis proved as much. However, there’s no need for investors to get involved to with the complex securities that spelled the demise of so many banks.
No sir. The proper way to bet on the mortgage market these days is with ETFs and we imagine that’s probably something your broker neglected to mention.
SPDR KBW Mortgage Finance ETF (NYSE: KME): The SPDR KBW Mortgage Finance ETF, with an expense ratio of 0.35%, tracks an index comprised of mortgage bankers, processors and marketers. That’s not the problem with this ETF. The problem is KME is heavily allocated (37.6%) to home builders and no one knows when those stocks are going to rebound. There is more than eight months of housing supply on the market as we speak and that glut is terrible news for home builders. KME needs the economy to turn in a hurry to captivate investors.
SPDR Barclays Capital Mortgage Backed Bond ETF (NYSE: MBG): As a bond play, the SPDR Barclays Capital Mortgage Backed Bond ETF has held nicely year-to-date as in its positive. MBG has an expense ratio of 0.32% and nearly $39 million in assets under management, but its roster is comprised almost entirely of U.S. government agency debt and that means a dividend yield of just 1.85%.
Vanguard Mortgage-Backed Securities ETF (NYSE: VMBS): The Vanguard Mortgage-Backed Securities ETF isn’t significantly different from MBG unless the 0.15% expense ratio and $97.9 million in AUM are big deals to you. Kidding aside, VMBS is home to 261 bonds, almost all of which are U.S. government issues, with an average duration of three years. VMBS and MBG have charts that are basically twins.
Market Vectors Mortgage REIT Income ETF (NYSE: MORT): MORT made its debut in August and has the potential to become the dominant equity-based mortgage ETF on the market. The new offering has attracted $4.5 million in AUM and with a 30-day SEC yield of 15.5% and a 12-month trailing yield of over 3%, more assets should be on the way. MORT sets itself apart from other REIT ETFs in that the ETF does not provide exposure to finance companies or savings associations.
Courtesy of Benzinga
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