Financial Well-being

PGIM Ultra Short Bond ETF (PULS) is a good low expense (0.15%) ultra short-term total bond fund ETF. It invests into investment grade (AA rated) corporate and government bonds with effective duration of 3 months. It offers 0.50-1% better return than AAA rated ultra short treasury bond ETFs such as SGOV. I believe such extra return might be worth, in spite of little bit lower rating. It's going forward yield to maturity is currently 6.04% Updated on Jan 12, 2025: PULS has continued outperforming it's underlying index 4 years in a row. It returned 6.12% last year (we discussed about it last year in Feb) as compared to ultrashort index's 4.39%. Hope it continues it's outperformance this year too.  This AA rated ultrashort (currently less than 1 month duration) Total bond fund ETF seems to be much better option than most of short term bank CD or high yielding savings account or most of money market funds. As Fed has cut interest rate few times last year, it's going forw...

Someone asked me if I know any good ETF for AI stocks. I did some digging and sharing my findings below: One can look into *Themes Generative Artificial Intelligence (WISE) ETF*. It's inexpensive passive index which invests into companies that have (or are expected to have) exposure to the provision of products and/or services that contribute to AI related industries.  As compared to broad technology index, WISE is 10% more expensive with P/E of 30. Perhaps one can try *slowly* building position in it by buying on dip during future downward cycles. For this index, companies are only eligible if they generate at least 50% of their revenues from activities which make use of technologies such as Artificial Intelligence (AI), Data Analytics and Big Data, Natural Language Processing and AI-driven services. Expect lots of volatility for this cutting edge technology sector. This is how it's last 6 months chart looks like:

I believe *actively* managed Vanguard Core Bond ETF (VCRB) is better substitute to 2 decades old *passive* (market value weighted) Vanguard Total Bond Market ETF (BND). In fact, market value of a bond offering doesn't make any sense to be a criteria to allocate more weight (allocation of money) to that bond offering. That's one reason why actively managed bond funds have been outperforming passive bond funds. Normally actively managed bond funds have higher expense ratio, but VCRB is an exception with just 0.10% expense ratio. As such, above bond fund should be used only for long haul investing such as in IRA or 401(K). Since they tend to be interest rate sensitive, we should *avoid* them for short term savings such as emergency funds. Updated on Feb 15, 2025: It outperformed it's *intermediate term* bond index during last 1 year by 1% (5.31% vs 4.38). Going forward, it's expected to return 5.15% based on it's yield to maturity.  I am glad I switched all my intermed...

Recently I came across another *semiconductor* focused low cost index ETF which seems quite promising index. It's called SPDR S&P Semiconductor ETF ( *XSD*). Unlike iShares Semiconductor ETF SOXX ( https://financial-well-being.blogspot.com/2022/01/iShares-Semiconductor-ETF-SOXX-Passive-Semiconductor-technology-index.html ), which focuses primarily in *large* cap, XSD focuses into *small and mid* cap semiconductor companies of S&P Total index. It's *equal weighted* index and that's why it's average capitalization is in mid and small cap.Overall it's comparable or *even better* than SOXX. For example... - It's PE is comparable to that of SOXX - Dividend yield plus earnings growth of 16% as compared to lower 13% for SOXX - It's 3/5 year returns of 23/22% is 20% better than that of SOXX's 19/18%. It tracks *semiconductor small cap* sector which has been one of the top performer in technology sector with close to *20% annual return* for last 5, 10 an...

Going forward I am thinking to add an *Emerging* Asia Pacific market ETF called iShares MSCI India Small-Cap ETF ( *SMIN* ). It's *top performer* for last 3 and 5 years period with annual returns of 22% and 13% for this emerging market segment. With 22% long-term *earning growth* projections, it's expected to produce top long-term return. As *country specific* fund, it's certainly concentrated and is more expensive (0.75% expense ratio). However, unlike other top performer ETFs, it's focus is not specific to any hot speculative industry. Also, it's capitalization falls into *mid* cap (borderline large cap) range, making it less aggressive than typical small cap etf. It's P/E of 22 is 10% higher than typical India equity fund. However, it's long term earnings growth projection of 22% is 30% more than it's category. So it's total return potential is still way (20-30%) higher than typical India equity fund. I am planning to build more position into it...

iShares iBoxx Investment Grade Corporate Bond ETF ( *LQD*) seems to offer 1% better return than Vanguard Total Corporate Bond ETF (VTC). Also it's bonds are better rated (A as compared to BBB) and it's expense ratio of 0.140% is comparable. Vanguard Interm-Term Corp Bd ETF (VCIT) has lower quality (BBB instead of A) and is less diversified. Accordingly, it should have produced better performance (than LQD) due to these added risks. But, it hasn't.

iShares® 0-3 Month Treasury Bond ETF (SGOV) is ultra short term treasury bill ETF. It's expense ratio is near zero (just 0.07%) and it's latest (last 30 days) yield is 5.28%. Since it primarily holds US government bonds, this ETF is state and local tax exempt. Unlike CDs, there is no early withdrawal penalty. For saving money for emergency fund and short term goal expenses, SGOV seems like a good option. Since it is ultra short term bond fund, principal preservation is as good as any other money market fund.