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MONEY MANAGEMENT UPDATE FEBRUARY 11, 2012

February 11th, 2012

INCOME-ORIENTED ETF YIELDS FOR FEBRUARY 11, 2012: The current market is still reflecting an increasing tolerance towards risk. Money that has been in money market funds yielding zero and intermediate-term (7-10 year maturities) treasury bonds & notes yielding 2.5% are searching for higher rates of return. All that remains for these conservative investors and institutions is the all-clear signal that the return sufficiently compensates for the risk in lower quality bonds, high dividend paying equities, and high yielding preferred stocks.

The following list is comprised of ETFs that are geared towards income and income plus growth. They are ranked according to their present dividend yield with average daily volume exceeding 1 million shares for maximum liquidity and the most efficient executions.

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All of the funds that are mentioned above excluding XLU – Utilities Select Sector SPDR and TLT – Barclay’s 20+ Year Treasury Bond Fund have enjoyed spectacular price runs since last October – November. While their yields may appear attractive, their charts indicate that a correction is overdue in these issues. Bonds and preferred stock are like any asset class and are subject to periods of overvaluation, overbought conditions, and too much optimism from the public. There will be a better time in the future to take positions in these high-yield investments.

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“Some investors live or die by earnings reports. Earnings are important, but who knows if the reported earnings are accurate? A clever accountant can make earnings appear good or not so good, depending on the season or objective. There can be no subterfuge about a cash dividend. It is either paid or it is not paid. If it is paid, the shareholder knows that the company is making money. If it is not paid, no rhetoric can disguise the circumstances.”

Geraldine Weiss and Gregory Weiss ~ Authors of The Dividend Connection (1995)

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