Evolution is a phenomenon that has always intrigued me. I find hope in our ability to change… for the better… as necessary.
Adaptive change is evident in many systems. As criminals get more cunning, cops wise up. As cops wise up, criminals become even more cunning.
Changing market conditions and investors interact in much the same way.
I recently came across a real-estate investment trust (REIT) fund that, amidst a market environment that’s been dubbed the “new normal,” devised a new method for picking investments. Instead of focusing on market cap, the KBW Premium Yield Equity REIT Index (KBWY) uses a yield-focused approach to picking winning investments.
Basically, the fund manager measures dividend payout ratios and assesses the REIT’s ability to continue paying high yields into the future. This allows the fund to narrow hundreds of potential investments down to as few as 25 of the “best paying” REITs.
The fund is shown here outperforming the popular Dow Jones Industrial Average ETF (DIA) by 8% this year…
The KBW Premium Yield Equity REIT fund is relatively new, having launched in 2010.
I think the fund’s methodology – focusing on yield and payout ratios – is a prime example of the financial industry’s evolution alongside “new normal” investors who are now demanding income-producing investments.
Paid-up Boom & Bust subscribers already own a stock that is in KBWY’s “Top 10” holdings. We recommended it as a “Buy” earlier this year and we’re up more than 17% as of today.
If you haven’t done so already read the Survive & Prosper issue on “Financial Markets Could End Up in the “Irons”.”