5 Exciting ETFs for Investing in Preferred Stocks in 2025!
Meta Description: Discover the top 5 ETFs for investing in preferred stocks in 2025. Learn about opportunities, strategies, and tips for maximizing your investment potential.
Introduction
In the ever-evolving world of investment opportunities, preferred stocks have emerged as a unique avenue for investors seeking stability and income. With their hybrid characteristics—encompassing features of both stocks and bonds—preferred stocks provide a compelling option for those looking to diversify their portfolios. For investors keen on efficient diversification, investing in exchange-traded funds (ETFs) focused on preferred stocks can be an ideal solution. As we approach 2025, it’s exciting to explore the potential of these investment vehicles, which are designed to minimize risk and maximize returns.
In this article, we will delve into five remarkable ETFs that are geared towards preferred stocks. We will consider each ETF’s performance, holdings, and strategies, equipping you with the knowledge you need to make informed decisions about your investments. Whether you are a seasoned investor or new to the market, this guide will illuminate the path ahead with a cheerful and optimistic perspective on these investment options.
Understanding Preferred Stocks
Before diving into the exciting ETFs, it’s essential to grasp what preferred stocks are and why they are an attractive investment choice. Preferred stocks offer a fixed dividend similar to bonds, which makes them appealing to income-seeking investors. Additionally, they are prioritized over common stocks in dividend payments and have a claim on assets in the event of liquidation. However, they typically do not have voting rights, which is where common stocks differ.
The unique characteristics of preferred stocks provide investors with better risk-adjusted returns, especially in volatile markets. According to a report by S&P Dow Jones Indices, preferred stocks have delivered significant returns over the last decade, particularly appealing during periods of economic uncertainty. With increasing interest in these investments, especially as we approach the latter half of the decade, preferred stock ETFs have become a hot topic in the financial community.
Investing in ETFs for preferred stocks allows investors to hold a diversified portfolio without needing to select individual stocks actively. Now let’s take a closer look at five exciting ETFs available in 2025 that focus on preferred stocks.
1. iShares U.S. Preferred Stock ETF (PFF)
The iShares U.S. Preferred Stock ETF (PFF) is among the largest and most widely recognized ETFs in the preferred stock arena. With a diversified portfolio of U.S. preferred stocks, PFF provides exposure to securities that pay high dividends, which is a major draw for dividend-focused investors.
One of the key features of the PFF is its substantial yield, which generally surpasses that of common stocks. According to recent data, the ETF typically boasts an average yield ranging from 4% to 6%, making it attractive for income-seeking investors.
The fund holds over 250 preferred stocks in its portfolio, covering various sectors, including financials, utilities, and telecommunications. These holdings include well-established companies such as Bank of America, Wells Fargo, and AT&T, ensuring a solid foundation for income generation.
PFF employs a passive investment strategy, tracking the performance of the S&P U.S. Preferred Stock Index, which reflects the performance of preferred stocks issued by U.S. companies. This provides investors with an opportunity to participate in the growth potential of these securities while minimizing risk through diversification.
2. Invesco Preferred ETF (PGX)
Next up is the Invesco Preferred ETF (PGX), a prominent player in the preferred stock space. PGX seeks to provide investors with higher income potential through preferred securities while maintaining a strategic focus on quality.
The fund primarily invests in preferred stocks that are rated investment-grade, effectively mitigating the risk associated with lower-rated securities. PGX holds a comprehensive range of preferred offerings, particularly focusing on utilities and financials. Some leading holdings include issuances from corporations like Citigroup, Goldman Sachs, and Duke Energy.
As of 2025, PGX has shown consistent performance in terms of dividend distribution, providing yields in the range of 5% to 6%. Furthermore, PGX offers a competitive expense ratio, making it a cost-effective option for investors looking to enhance their income portfolio.
Investors also appreciate PGX’s active management team, which can efficiently reallocate assets in response to market trends. With its solid fundamentals and passive tracking of the ICE U.S. Preferred Stock Index, PGX has become a go-to option for preferred stock enthusiasts.
3. SPDR Wells Fargo Preferred Stock ETF (NYSE: PSK)
The SPDR Wells Fargo Preferred Stock ETF (PSK) presents another excellent choice for those interested in investing in preferred stocks. One of the standout features of PSK is its commitment to providing a diversified portfolio across various sectors.
With an emphasis on North American preferred securities, PSK aims to provide a relatively higher yield than traditional equities while reducing risk. The ETF primarily focuses on financials, which constitute a significant portion of its holdings.
The ETF’s yield is noteworthy, often hovering around the 5% mark, which appeals to income-focused investors. Additionally, PSK is structured to adapt to changing market conditions, leveraging Wells Fargo’s extensive research and analytical capabilities.
Importantly, PSK’s diverse holdings and rigorous selection criteria help investors avoid high-risk securities that may adversely impact returns. This thoughtful approach makes PSK a solid contender for anyone keen on the benefits of preferred stocks.
4. Nuveen Preferred Securities Income Fund (JPS)
For investors looking for a closed-end fund experience, the Nuveen Preferred Securities Income Fund (JPS) could be an appropriate choice. JPS focuses on providing investors with income through a mix of preferred stocks and debt securities.
While JPS is a closed-end fund, its strategy correlates closely with open-end ETFs, making it an appealing option for those interested in preferred stocks. JPS aims to achieve a high level of current income by investing primarily in preferred securities that exhibit attractive yields.
With a yield that can reach up to 6%, JPS stands out for its income generation capabilities. The fund has a diversified mix of holdings, including major industries such as financial services, utilities, and healthcare. JPS’s active management style allows the fund to capitalize on potential opportunities that may arise in the preferred stock market.
Investors appreciate that JPS employs a disciplined investment approach, ensuring a focus on securities that have strong fundamentals and attractive income potential. This thoughtful selection process is a significant benefit for those looking for yield in the preferred stock landscape.
5. First Trust Preferred Securities and Income ETF (FPE)
Last but certainly not least is the First Trust Preferred Securities and Income ETF (FPE). This ETF is designed to provide investors with income and capital appreciation through a diversified portfolio of preferred stocks.
FPE is unique in that it not only invests primarily in U.S. preferred stocks but also includes preferred securities from international issuers. This diverse approach allows investors to capture global opportunities within the preferred stock space.
The fund typically yields between 4% and 5%, making it a respectable option for income-seeking investors. FPE holds a well-diversified pool of preferred stocks, focusing on significant sectors like financials and utilities. Companies like American Tower and NextEra Energy are notable holdings that reflect the ETF’s broader strategy.
FPE is particularly appealing for investors who prefer a mix of foundational income along with the potential for capital gains. The fund’s strategy incorporates active management practices, allowing it to tap into opportunities within the preferred stock market effectively.
Practical Tips for Investing in Preferred Stock ETFs
- Research and Due Diligence: Before investing in any ETFs for preferred stocks, conduct thorough research on the fund’s holdings, expense ratios, and historical performance.
- Understand Risks: While preferred stocks generally offer better yields than common stocks, they are not without risks. Understand credit risk and interest rate sensitivity.
- Diversified Approach: Consider investing in a mix of preferred stock ETFs to maximize diversification across sectors and issuers.
- Monitor Market Trends: Keep an eye on interest rate movements and macroeconomic factors that may affect preferred securities, as these can significantly impact returns.
- Consult Professionals: If you’re new to investing or unsure about your options, consider consulting with a financial advisor to tailor your portfolio to your investment goals.
Audience Engagement Questions
What are your experiences with investing in ETFs for preferred stocks? Have you found certain funds to be more beneficial than others? Feel free to share your thoughts in the comments or tag us on social media.
Conclusion
As we look ahead to 2025, investing in ETFs for preferred stocks presents a unique opportunity to increase income potential while diversifying portfolios. Whether you opt for the iShares U.S. Preferred Stock ETF (PFF), the Invesco Preferred ETF (PGX), the SPDR Wells Fargo Preferred Stock ETF (PSK), the Nuveen Preferred Securities Income Fund (JPS), or the First Trust Preferred Securities and Income ETF (FPE), each of these funds offers investors compelling choices in the preferred stock space. By leveraging the insights provided in this article, you can navigate this investment landscape with confidence.
Don’t forget to explore more financial tools and products available at FinanceWorld.io, including Trading Signals and Copy Trading. Share your experiences related to preferred stocks and ETFs with us—we love hearing from our community!
