Precious metals have long been seen as a safe haven during any market uncertainty. And as the stock market displays the occasional warning signal of stress, these commodities have been big winners over the past year. Gold prices are up 77% over the past 12 months, and silver has fared even better, rising 153%.
But it’s also worth noting that both gold and silver have stumbled lately. Gold fell nearly 13% from its late-January high before making a slight recovery; silver is down 31% from a high of $114 and is now trading at $80.
That’s why a warning from Hank Smith, CIO of the Haverford Trust, is getting attention these days. He warns that investors should be cautious about putting money into gold, silver or any commodities. He says growth in 2025 and early this year is fueled more by momentum than substance, and investors should consider stocks that offer yield, such as dividend stocks.
“Those (commodities) are speculation. They’re not investments,” he told Business Insider. “Because physical commodities don’t have earnings, they don’t have an income statement, a balance sheet, they don’t pay dividends or interest – you buy them with the expectation that someone will come along and buy at a higher price. That’s the only way you’ll make money.”
Smith has an idea – investors should never consider putting all of their investments into one class, such as commodities. And while I believe that gold, silver, and even cryptocurrency have a place in a well-diversified portfolio, I agree that investors should have the bulk of their investments in the stock market in search of yield.
Here are two ways to capitalize on this strategy through exchange-traded funds. Each has a different strategy, but is geared towards delivering returns through proven strategies.
The Schwab US Dividend Equity ETF (SCHD) is one of the most popular dividend ETFs on the market, with $78.5 billion in net assets and a trading volume of nearly 20 million shares per day.
The fund tracks the total return of the Dow Jones US Dividend 100 Index, which includes US dividend-paying stocks. The fund focuses on high value stocks that offer stable returns and dividend growth – ideal for any investor looking for a consistent return.
The fund’s top holdings include Verizon Communications (VZ), Coca-Cola (KO), Altria Group (MO), ConocoPhillips (COP), and Lockheed Martin (LMT). No single stock in the ETF has a weighting greater than 4.5%, giving the fund significant diversification without overexposure to any single name.
The fund is up 13.4% over the past year, which is slightly underperforming the S&P 500 ($SPX). But when you calculate total return, including dividends, the SCHD ETF comes out on top, with a one-year return of 18.6% versus a one-year total return of 16.5% for the broader index.
The SCHD ETF has a low expense ratio of 0.06%, or $6 annually per $10,000 invested, and yields 3.5%.
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My favorite ETF for yield right now is the JP Morgan Nasdaq Equity Premium Income ETF (JEPQ). This is an actively managed fund that uses a covered call strategy to invest in Nasdaq-100 stocks through equity-linked notes. Fund managers for JP Morgan Asset Management sell out-of-the-money call options on stocks and then pay the proceeds to shareholders through a monthly dividend.
While options are not for every investor, this is a relatively safe way to invest. The covered call strategy limits downside risk (and upside potential), and because you’re investing in the ETF instead of owning the options, you never have to worry about being assigned shares or losing money on a bad options bet.
This strategy also means you’re investing in some of the biggest stocks on the market. Nvidia (NVDA) isn’t considered a true dividend stock because it only pays a small dividend of 1 cent per quarter. But because JEPQ works on a covered call strategy. Nvidia is the largest holding in the fund, with a 7.1% weighting. The fund’s other top holdings, which include 92 stocks, are Apple (AAPL), Alphabet (GOOG) (GOOGL), Microsoft (MSFT) and Amazon (AMZN).
JEPQ is up just 2% over the past year, underperforming the S&P 500. But with an amazing 10.3% dividend yield thanks to the covered call strategy, it has a total return of 13.5%, which is close to matching the broader index. This fund has an expense ratio of 0.35%.
If you’re looking for an aggressive dividend yield and exposure to the biggest stocks in the market, the JEPQ ETF is hard to beat.
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At the time of publication, Patrick Sanders held a position in: JEPQ, NVDA. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com
