iShares S&P U.S. Preferred Stock Index Fund
The iShares S&P U.S. Preferred Stock Index Fund (NYSE:PFF) is a wholly different way to diversify, as we’re actually talking a different asset class: preferred shares.
Preferred stock often is called a “hybrid security,” since it has elements of both common stock and bonds. Preferreds provide a steady stream of income just like stocks — and, in fact, their dividends usually are higher than common stocks, and must be paid out before common stocks, meaning that payout is safer. However, they’re also are a rated security just like bonds, and they generally don’t carry voting rights.
The PFF is the largest ETF of its kind, by both assets ($10.75 billion) and number of holdings (288). The majority of the fund’s preferred shares are from financial and bank stocks like Wells Fargo (NYSE:WFC) and Bank of America (NYSE:BAC), though it also holds the preferreds of other companies such as General Motors (NYSE:GM).
Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he was long MSFT and XOM.