4 ETFs to Buy With Your Tax Refund (DEM, OIH, EMCB)
April 17 is usually just another day, but this year, it has the distinction of replacing April 15 as Tax Day in the U.S. Most folks don't like paying taxes, but some such as Warren Buffett, have been kind enough to volunteer to pay more.
Eschewing a laborious debate on U.S. tax code and policy, let's just run with the simple facts. As the Wall Street Journal reported, in 2011 the IRS refunded $300 billion, or 25 cents for every $1 it collected. That means 80% of the 143 million returns filed earned a refund, the Journal reported.
The average refund is around $3,000. That's not Buffett money, but it's still a decent chunk of change. So before you go spending most of that refund on the new iPad or cargo shorts from Abercrombie & Fitch (NYSE: ANF), consider some ETF portfolio building with the following funds.
WisdomTree Emerging Markets Equity Income Fund (NYSE: DEM) Somewhat quietly, the WisdomTree Emerging Markets Equity Income Fund continues to rake in assets under management. At the end of February, we noted the fund eclipsed the $3 billion AUM mark. Today, DEM has nearly $3.7 billion in AUM.
The fund offers exposure to 18 countries, but Taiwan, Brazil and South Africa combine for 53% of the country weight. DEM features a 30-day SEC yield of almost 6.8%. That's better than triple what the iShares MSCI Emerging Markets Index Fund (NYSE: EEM) offers. Plus, DEM's expenes ratio of 0.63% is better than EEM's 0.67%/ and DEM has sharply outperformed the iShares fund over the past five years.
WisdomTree Emerging Markets Corporate Bond Fund (Nasdaq: EMCB) Why not use some of that tax refund to kill multiple birds with one ETF stone. The still new EMCB, the first emerging markets corporate debt bond fund to come market, helps investors fill bond, emerging markets and yield voids in their portfolios.
EMCB features a 30-day SEC yield of 4.7% and most its holdings rate as investment grade as 48.3% of the fund's issues are rated BBB and another 19.9% are rated A. Brazilian, Russian and Mexican bonds combine for about 55% of EMCB's weight. The fund has proven so popular that iShares has decided to copy the idea.
SPDR S&P Retail ETF (NYSE: XRT) Instead of squandering your refund at some of XRT's 96 constituents, use your refund and bullish consumer data to your advantage by considering a stake in XRT. At the start of trading today, XRT had slid more than 2% in the past month, but has erased almost all of those losses and there's still plenty of time to go in Tuesday's session. If U.S. economic data remains supportive, XRT could challenge the $64-$65 area later this year.
Market Vectors Oil Services ETF (NYSE: OIH) For those that already have their tax refunds, OIH might be worth a look now ahead of some critical earnings reports this week. OIH doesn't have the best looking chart out there and the ETF has slid 9.5% in the past month, but Wednesday's earnings update from Halliburton (NYSE: HAL) and Friday's report from Schluberger (NYSE: SLB) will impact OIH one way or the other. Those two stocks account for over 29% of OIH's weight.
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