Could we improve on investing in a market index-exchange traded fund? How? Are there downsides?

As we frequently state, historically,

  1.  over the long term,
  2.  properly selected US market index exchange-traded funds (ETFs),
  3.  held in tax-advantaged accounts,
  4. in an appropriate asset allocation,

have been the investor’s best way for growing savings and are likely to remain so for many years. One major benefit of this approach to investing in addition to the returns, is its ease of implementation and maintenance. Put it in place, go fishing and watch your investments grow.

One of our members, an expert, claims that if you took such an index ETF, for instance SPY, and removed the companies carrying large debt, you would get better performance. True enough, much of the time, although, in the present interest-rate environment, many companies can earn more with the borrowed money than the cost of that money. (So can we, if we are comfortable with the idea.)

What about if you concentrated on the companies repurchasing their shares? (Share repurchases increase share prices.) That produces better performance all the time.

We recently discovered such a company – Cambria Shareholder Yield ETF (SYLD). Over the last three years, SYLD has outperformed SPY (See chart above.). Morningstar gives it a five-star rating while giving SPY four stars.

How can we benefit by holding SYLD in our portfolios? What are the downsides?

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Dr. Milan Somborac

The Monday Morning Millionaire Program supports do-it-yourself (DIY) investors which I have been for over 50 years. About my team and me