JPMorgan Chase (JPM) stock is higher out of the gate Wednesday after the world's largest bank kicked off fourth-quarter earnings season with a bang, beating top- and bottom-line expectations.

In the three months ending December 31, JPMorgan said its revenue increased 9.5% year over year to $43.7 billion, boosted by 17.5% growth in its Commercial & Investment Bank segment to $17.6 billion. Its earnings per share (EPS) rose 58.2% from the year-ago period to $4.81.

The results beat analysts' expectations. Wall Street was anticipating revenue of $41.7 billion and earnings of $4.11 per share, according to CNBC.

"The Firm concluded the year with a strong fourth quarter, generating net income of $14.0 billion. Each line of business posted solid results," said JPMorgan CEO Jamie Dimon in a statement. "In Consumer and Community Banking (CCB), we continued to acquire new customers across Consumer Banking, Business Banking, Card, and wealth management. For example, nearly 2 million net new checking accounts were opened during 2024."

JPMorgan ended the quarter with $4 trillion in assets under management and a book value per share of $116.07, representing year-over-year increases of 18% and 11%, respectively.

For fiscal 2025, JPMorgan said it expects to achieve net interest income of approximately $94 billion, an increase of about 1.5% from $92.6 billion in fiscal 2024.

"This was a very good print for the stock, especially as many investors were worried that JPM would be a funding mechanism to chase some of the lower-quality banks out there," wrote David Wagner, portfolio manager at Aptus Capital Advisors, in emailed commentary. "We were most impressed with the company's big revenue beat, and importantly, net interest income was quite strong."

Is JPMorgan stock a buy, sell or hold?

JPMorgan Chase has done well on the price charts over the past 12 months, up 50% on a total return basis (price change plus dividends) vs the S&P 500's 24% gain. Unsurprisingly, Wall Street is bullish on the Dow Jones stock.

According to S&P Global Market Intelligence, the consensus recommendation among the 23 analysts following the financial stock that it tracks is a Buy.

CFRA Research analyst Kenneth Leon is one of those with a Buy rating on the large-cap stock. ""JPM is gaining wallet share across many different core businesses," including investment banking and mergers and acquisitions (M&A), Leon says. "We also see midsize companies looking to shift loans and other services to larger banks like JPMorgan."

Meanwhile, analysts' price targets have had a hard time keeping up with JPM's run higher. The average analyst price target of $254.53 represents implied upside of roughly 2% to current levels. Analysts may revise their price targets higher following the strong quarter.

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Citi expects a recession as a result of several macroeconomic factors, including persistent inflation in services and rising debt, CEO Jane Fraser said today, December 6, during testimony before a Senate Banking Committee hearing.

“Although we don’t see a drastic downturn on the horizon, we do expect a recession as the result of a range of macroeconomic factors,” Fraser said in her opening remarks. “This includes persistent inflation in services, rising debt, a slowdown in global growth and two major conflicts in Europe and the Middle East.”

Fraser, along with seven other banking and financial services executives including JP Morgan CEO Jamie Dimon and Bank of America CEO Brian Moynihan, were called to testify today during the Banking Committee's annual oversight of Wall Street firms hearing.

Neither Dimon nor Moynihan commented on a recession in their opening remarks at the hearing. However, Dimon echoed similar concerns as Fraser when he spoke at the 2023 New York Times DealBook Summit last week.

“A lot of things out there are dangerous and inflationary,” Dimon said. “Be prepared. Interest rates may go up and that might lead to recession.”

Moynihan only mentioned that the economy is volatile and uncertain as he delivered opening remarks at the hearing.

A slowdown more likely?

Kiplinger staff economist David Payne reported last week that an economic slowdown is expected in the first half of 2024, but not a recession. “Despite the slowdown, 2024 growth should still be a moderate 1.7%.”

He added that the Federal Reserve is unlikely to raise interest rates anymore because of the expected slowdown. However, he said, the Fed "is also not likely to cut rates anytime soon because it is still determined to combat inflation. Inflation is on a downtrend, but the Fed wants to make sure it doesn’t get stuck at a level higher than 2%.”

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Stocks opened mostly higher Friday as investors took in the latest inflation data and earnings reports. The main indexes lost steam as the session wore on, though the tech-heavy Nasdaq Composite held on for a win thanks to impressive earnings from mega-cap stock Amazon.com (AMZN).  

The Bureau of Economic Analysis this morning said its September personal consumption and expenditures (PCE) index, the Fed's preferred measure of inflation that tracks consumer spending, was up 0.4% month-over-month and 3.4% year-over-year – both figures matching what was seen in August.

Meanwhile, the monthly increase (+0.3%) in the core PCE index, which excludes volatile food and energy prices, was higher than the previous month, though the annual increase (3.7%) was lower.

Today's data "provided confirmation that the Federal Reserve’s monetary policy is continuing to reduce inflation over time, albeit slowly," says Brian Pietrangelo, senior vice president and managing director of investment strategy at Key Private Bank. "We believe the Federal Reserve is highly likely to pause interest rate hikes next week given the directional slowing of PCE inflation to wait for additional data, including the Employment Situation next Friday, to consider for the December meeting."

JPMorgan stock sinks on news Dimon will sell shares

JPMorgan Chase (JPM) was one of the worst Dow Jones stocks Friday after a securities filing revealed Jamie Dimon, CEO of the financial giant, plans to sell 1 million JPM shares in 2024. Dimon currently owns 8.6 million shares of JPM, and it will mark his first stock sale since he took over the head role in 2006. 

"Mr. Dimon continues to believe the company’s prospects are very strong and his stake in the company will remain very significant," JPMorgan Chase said in the 8-K filing. Nevertheless, the blue chip stock tumbled 3.6% today.

However, the worst Dow stock today was Chevron (CVX), which plunged 6.7% after the oil major reported third-quarter earnings of $3.05 per share – well below the $3.70 per share analysts were expecting. Still, revenue of $51.9 billion came in above estimate. Earlier this week, Chevron said it will buy fellow energy firm Hess (HES) for $53 billion in stock.

Amazon earnings keep Nasdaq above water

As for the main indexes, the blue chip Dow Jones Industrial Average fared the worst, shedding 1.1% to 32,417. The S&P 500 fell 0.5% to 4,117, ending in correction territory following a 10% decline from its July 31 closing high of 4,588.96. 

The Nasdaq, which entered a correction on Wednesday, eked out a 0.4% gain to 12,643, thanks to impressive Amazon earnings. The e-commerce giant reported much higher than expected third-quarter earnings of 94 cents per share on revenue of $143.1 billion. Operating income of $11.2 billion came in well above the company's forecast, though revenue growth (+12% year-over-year) in the company's Amazon Web Services (AWS) cloud segment was softer than anticipated. AMZN stock surged 6.8% today.

There are plenty of big events next week that have the potential to spark volatility in stocks. In addition to the Fed meeting and Friday's jobs report, several high-profile companies – including tech giant Apple (AAPL, +0.8%) – are on the earnings calendar.

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Stocks started the day on solid footing as investors cheered the first round of big bank earnings. However, sentiment waned as the session wore on, with market participants spooked by a disappointing consumer sentiment reading and rising geopolitical tensions.  

All three main benchmarks were in positive territory to start the day after several of the country's largest banks posted stronger-than-expected third-quarter results. JPMorgan Chase (JPM, +1.5%), for one, said earnings jumped 39% year-over-year to $4.33 per share, while revenue rose 21% to $40.7 billion. 

Meanwhile, net interest income, which is a key measure of profitability for banks that shows the difference between revenue made on interest-bearing accounts like loans and the costs paid for deposits, surged 30% to $22.9 billion.

Despite the well-received results, JPMorgan CEO Jamie Dimon said in the company's earnings release that "this may be the most dangerous time the world has seen in decades." 

The executive pointed to tight labor markets and "extremely high government debt levels" that could keep both inflation and interest rates higher for longer. Dimon also warned of the "far-reaching impacts" from the war in Ukraine and attacks on Israel. 

Consumer confidence drops as inflation expectations rise

The major indexes found themselves in negative territory by lunchtime after the University of Michigan said its consumer confidence index fell to 63.0 in October from September's reading of 68.1. Notably, the data showed year-ahead inflation expectations jumped to 3.8% from last month's 3.2% – the highest level since May – while long-term inflation expectations rose to 3.0% from 2.8%. 

Market participants also worried about rising tensions in the Middle East after Israel on Friday called for the mass evacuation of 1.1 million civilians in northern Gaza. United Nations spokesman Stéphane Dujarric said the organization considers such an act "impossible," and one that cannot occur "without devastating humanitarian consequences."

Energy stocks outperform as oil prices spike

The geopolitical turmoil had an outsized effect on U.S. crude futures Friday, which soared 5.8% to settle at $87.69 per barrel. Not surprisingly, energy stocks (+2.2%) outperformed today, with APA Corp (APA, +5.2%), EOG Resources (EOG, +3.8%) and Marathon Oil (MRO, +4.7%) among the biggest gainers.

As for the major indexes, the Nasdaq Composite (-1.2% at 13,407) and the S&P 500 (-0.5% at 4,327) both finished lower on the day. The Dow Jones Industrial Average, on the other hand, ended with a 0.1% gain to 33,670 thanks to stronger-than-expected Q3 earnings from UnitedHealth Group (UNH, +2.6%). At nearly $540 a share, UNH has the greatest influence of all 30 stocks in the price-weighted Dow.

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Trading was turbulent on Monday as investors digested the latest bank headlines and looked ahead to the next Fed meeting. 

In addition to news that UBS Group (UBS) will take over embattled competitor Credit Suisse (CS), reports emerged that JPMorgan Chase (JPM) CEO Jamie Dimon is leading efforts to save beaten-down regional lender First Republic Bank (FRC). Those developments helped lift most bank stocks – although two in particular took notable dives. 

After last week's turmoil at Credit Suisse, Swiss regulators over the weekend encouraged UBS Group to buy the bank for $3.2 billion, or not quite half of the latter's market value as of Friday's close. The deal sent shares of CS tumbling 53.0%, while UBS stock added 3.3%.

"After all the years of rumors suggesting that UBS and Credit Suisse could or would merge, it's finally happening, but as a hastily arranged brokered deal to help halt heavy outflows from CS, as well as designed to help bolster confidence in the global banking system," says Quincy Krosby, chief global strategist for LPL Financial. Given the speed with which the buyout occurred, there's likely to be a "host of questions" and a "broad range of concerns," including over "many of the risky and hard to price assets sitting on CS's balance sheets," the strategist adds.

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Back at home, First Republic Bank continued to struggle, slumping 47.1% even as JPMorgan CEO Jamie Dimon gathered with top bank CEOs to discuss rescue efforts to save the struggling regional lender. Last week, JPM and other big financial firms committed to depositing billions of dollars in First Republic to shore up its liquidity.

Meanwhile, investors kept a cautious eye trained on this week's Federal Reserve meeting, which kicks off tomorrow and will conclude on Wednesday with a policy decision. Interest rate traders assign a 73% probability to the Fed issuing a 0.25% interest rate hike. By the same token, the market is pricing in about a 27% probability that the central bank will pause its campaign of rate increases due to instability in the financial sector.

Ahead of the start of the two-day gathering, the Dow Jones Industrial Average rose 1.2% to 32,244, the S&P 500 gained 0.9% to 3,951, and the Nasdaq Composite added 0.4% to 11,675.

Gold is an "attractive opportunity" for investors

Following the recent turmoil in the bank industry, the word at the top of everyone's mind is "contagion," says George Smith, portfolio strategist; Jeffrey Buchbinder, chief equity strategist; and Lawrence Gillum, fixed income strategist at LPL Financial, with many folks wondering "if troubles at Silicon Valley Bank, CS, and others [will] spread to the wider banking sector and lead to a 2008-like banking crisis." Happily, the strategists say that several metrics of financial market stress "suggest the recent banking challenges are contained." 

Even so, the group reminds investors that when stocks are fluctuating wildly, it's critical to stick to a well thought-out plan that maintains focus on long-term objectives. One of the more attractive opportunities the LPL strategists pinpoint in this macro environment are precious metals – and particularly gold. Two of the easiest ways to gain access to the hard asset are through the best gold ETFs and the best gold stocks. 

Stocks opened lower Thursday before reversing course mid-morning and rallying into the close. 

Sparking the turnaround were reports that several of the country's largest banks – including blue chip stocks JPMorgan Chase (JPM) and Bank of America (BAC) – will provide beaten-down regional lender First Republic Bank (FRC) with a massive injection of deposits. Also lifting sentiment was news that Swiss National Bank offered a lifeline to Credit Suisse (CS). 

It's been a chaotic week in the financial sector sparked by weekend headlines surrounding the failures of Silicon Valley Bank and Signature Bank. While this has created substantial volatility among bank stocks, the broader market has been fairly resilient. Still, today's positive headlines allowed investors to breathe a sigh of relief that the disruption could be contained. 

As a result, the Nasdaq Composite jumped 2.5% to 11,717, the S&P 500 soared 1.8% to 3,960, and the Dow Jones Industrial Average gained 1.2% to 32,246.

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All but one sector – real estate (unchanged) – finished higher, with technology (+2.8%) and communications services (+2.2%) leading the way. Financials (+1.9%) were another solid gainer, thanks to strong price action seen across the sector. 

FRC stock, for one, was down more than 36% at its session low before ending the day up 10.3%. Boosting the volatile bank stock was news that JPM, BAC, Wells Fargo (WFC) and Citigroup (C) will deposit $5 billion apiece into First Republic. Several other banks will reportedly commit smaller amounts to the rescue effort.

Elsewhere, CS stock was up 18% at its session high after the bank secured a $50 billion loan from Swiss National Bank in what it called "decisive action to pre-emptively strengthen its liquidity." Shares ended the day down 0.2%, though. Anxiety around the strength of the Swiss bank – sparked in part by the recent closures of SVB and Signature Bank – sent its shares tumbling on Wednesday. 

Is tech the new safety play?

Are tech stocks the new safety plays? Tech and tech-related sectors like communications services have shown relative strength throughout the first quarter. Looking at the numbers, the tech-heavy Nasdaq is up more than 11% for the year-to-date vs a roughly 3% gain for the broader S&P 500 and a 3% decline for the blue-chip Dow.

There are two potential reasons for the outperformance, says Carrie King, global deputy chief investment officer of BlackRock Fundamental Equities. One is possible bargain hunting after a significant underperformance from tech and tech-related stocks last year. Another is the notable cost-cutting that's been underway, including massive layoffs. 

For investors looking to play the hot hand of the market, there are plenty of ideas, including those found among the best tech stocks and the best communication services stocks. As for industry-specific opportunities, these are the best semiconductor stocks and the best AI stocks to buy now.

If you're keen on having a human hand at the wheel of your mutual funds, it would be difficult to recommend a fund provider to start with ahead of Fidelity.

While a few of the fund world's other big names have made their fortunes on the back of cheap index investing, Fidelity's claim to fame is their management pedigree.

That starts with Peter Lynch, whose Fidelity Magellan (FMAGX) was the world's best mutual fund during his 13-year tenure.

And that continues to today with the likes of Will Danoff, Mark Notkin and some of the other managers you'll read about in a minute as we explore the best actively managed Fidelity funds to own for the long term.

The picks featured here rank among the best Fidelity mutual funds. They cover a variety of strategies, they all charge expenses that are at the very least below-average (if not in the bottom 20% of their Morningstar category), they're all accessible Investor-class shares, and they all have no investment minimum to get started.

Data is as of August 17. Yields on equity funds represent the trailing 12-month yield. Yields on bond funds are SEC yields, which reflect the interest earned after deducting fund expenses for the most recent 30-day period.

• Fund category: Large growth
• Assets under management: $173.4 billion
• Yield: 0.1%
• Expense ratio: 0.63%, or $63 annually for every $10,000 invested

We'll start with Will Danoff's Fidelity Contrafund (FCNTX), a piece of mutual fund history that was launched in 1967.

And, at the moment, it is both Fidelity's largest actively managed mutual fund and its second-largest product overall, lagging only the nearly $700 billion Fidelity 500 Index Fund (FXAIX).

It's difficult to beat an S&P 500 fund in assets. There's no shame in it, though, considering Danoff has the edge where it really counts.

Danoff's tenure with Contrafund started in 1990, which actually predates the first S&P 500 index fund, the SPDR S&P 500 Trust ETF (SPY), which launched three years later. Since coming aboard, Danoff has delivered a roughly 10,000% total return (price plus dividends), which is about two-and-a-half times better than the index.

Contrafund's strategy, per the site, is to invest "in securities of companies whose value FMR [Fidelity's parent company, but effectively alludes to fund management] believes is not fully recognized by the public."

That sounds like value, but FCNTX is categorized as a "large growth" fund. In reality, it's neither … and both.

Management can invest in growth stocks and/or value stocks to get the job done. Currently, it's awfully growth-heavy, with the 400-stock portfolio featuring big allocations to the likes of Meta Platforms (META), Nvidia (NVDA) and Amazon.com (AMZN).

You might have noticed we said "management" instead of just "Danoff." That's because after 35 years, Danoff isn't alone – he has a couple extra pairs of hands, with Fidelity adding co-managers Jason Weiner and Asher Anolic to the fund in April 2025.

"His comanagers are particularly talented and will likely thrive running their own sleeve," writes Robby Greengold, principal at Morningstar, which gives FCNTX a Bronze Medalist rating. "Anolic and Weiner were most recently longtime collaborators at Fidelity Advisor Equity Growth (and its near-clone Fidelity Growth Discovery) and Fidelity Capital Appreciation, where they implemented an outstanding investment approach."

Lest you think it's because Danoff is losing his touch, shorter-term performance metrics will quickly dissuade you from that notion. Instead, it's likely that Fidelity is just prudently preparing for the eventual departure of its 65-year-old star manager. But for now, he's still in the captain's chair.

"Danoff solely steered more than $300 billion in assets before Fidelity recently named additional comanagers to some funds he manages," Greengold writes. "He remains firmly at the helm of all of them and retains discretion when investing his portions."

Learn more about FCNTX at the Fidelity provider site.

• Fund category: Large growth
• Assets under management: $79.8 billion
• Yield: 0.2%
• Expense ratio: 0.47%

The Fidelity Blue Chip Growth Fund (FBGRX) is a large growth fund both in categorization and intent.

Sonu Kalra, who has helmed the fund since July 2009, invests in blue chip stocks (Fidelity's definition: "well-known, well-established and well-capitalized") with above-average growth potential.

The 390-stock portfolio leans heavily toward large-cap stocks; while Kalra can and does invest in mid-cap stocks, they're a modest part of the formula, commanding less than 15% of assets right now.

The Fidelity Blue Chip Growth Fund has done exceedingly well under Kalra's direction, topping both its category average and the Morningstar benchmark index for the trailing three, five, 10 and 15 years. During those periods, FBGRX is ranked among the top 6%, 5%, 5% and 4% of competing funds, respectively.

That's not terribly surprising once you consider what Kalra's portfolio holds, which (from a sector perspective) is a lot of tech stocks.

The technology sector itself – including numerous semiconductor stocks, such as top-10 holdings Nvidia, Broadcom (AVGO) and Marvell Technology (MRVL) – makes up nearly half of assets.

The tech-esque communication services sector represents another 20% or so, as does the consumer discretionary sector, which includes tech-like companies such as Amazon and Tesla (TSLA).

"A consistent overweighting in semiconductors has helped earn the fund one of the large-growth Morningstar Category's best results over the past decade," Greengold writes in explaining the fund's Silver Medalist rating.

But he adds a word to the wise: "Fidelity Blue Chip Growth's excellent leadership and skillful execution continue to be advantages, but the strategy is vulnerable if current enthusiasm for artificial intelligence wanes or geopolitical tensions flare."

Learn more about FBGRX at the Fidelity provider site.

• Fund category: Technology sector
• Assets under management: $23.1 billion
• Yield: N/A
• Expense ratio: 0.62%

Speaking of semiconductors and wild performance, let's look at Adam Benjamin's Fidelity Select Semiconductors Portfolio (FSELX).

FSELX is exactly what the name suggests: a tight portfolio of 56 companies representing the various parts of the semiconductor industry, including chipmakers, materials and equipment providers, electronic components, storage, and more.

The top 10 holdings are a who's who of blue-chip semiconductor stocks, including Nvidia (at a massive 27% weight) and Broadcom (at a still-large 14% weight).

If those overweights sound potentially problematic, well … they could be, though really only if their business hemorrhages to other companies not held within the fund.

Otherwise, what weighs on Nvidia's and Broadcom's shoulders likely will weigh on the rest of the portfolio, and vice versa – tailwinds such as cloud computing and artificial intelligence should prop up most of the lot.

"With valuations for many AI-related chip stocks on the high side, it will be important for companies to deliver on earnings expectations," Benjamin wrote during the fund's most recent portfolio manager Q&A back in February. "However, I continue to like the longer-term prospects for companies in the fund, driven by powerful themes that remain in play, especially the investment in infrastructure and software needed to support the growth of generative AI and the evolving data center architecture."

FSELX has been around since 1985, and it has enjoyed quite a bit of success since then. Benjamin, on the other hand, is a relatively recent hire, taking the reins in March 2020.

But so far, so good.

This Gold-rated fund hasn't just walloped its category average and benchmark index over every meaningful time period – it's among the top 1% and 2% over the trailing 15- and 10-year periods, respectively, and more germane to Benjamin's tenure, in the top 1% over the trailing three- and five-year periods, too.

Learn more about FSELX at the Fidelity provider site.

• Fund category: High-yield bond
• Assets under management: $14.1 billion
• Yield: 4.8%
• Expense ratio: 0.90%

One of the best actively managed Fidelity funds – the Fidelity Capital & Income Fund (FAGIX) – is also one of its least orthodox.

FAGIX is charged with "investing in equity and debt securities, including defaulted securities, with an emphasis on lower-quality debt securities" and "investing in companies in troubled or uncertain financial condition."

That's an interesting combination. The market is stuffed with plenty of funds that hold both stocks and bonds, called "allocation" or "balanced funds" – that's not abnormal.

However, managers Mark Notkin and Brian Chang run what would otherwise be considered a conservative allocation fund (15% to 30% equity – FAGIX is currently about 25% equity), except that their 65% allocation to bonds is almost entirely made up of below-investment-grade ("junk") debt. Overall bond quality in most conservative allocation funds tends to be much higher.

So essentially, the Fidelity Capital & Income Fund is either a really junky conservative allocation fund, or a hyper-aggressive high-yield fund. Morningstar, which gives FAGIX a Silver Medalist rating, leans toward the latter.

"The strategy stands out among even the most aggressive in the high-yield bond Morningstar Category for its hefty equity stake," Morningstar analyst Max Curtin writes. "Notkin makes full use of his 22% cap on equities during periods when he believes the yield premium of high-yield bonds over stocks (the latter of which is estimated using earnings yields of broad-based market indexes like the S&P 500) to be insufficient. Meanwhile, only a select few high-yield managers allocate even 1% to equities."

Notkin, who has run the fund for more than two decades, has managed FAGIX to a stellar track record. This Fidelity fund has beaten at least 97% of its high-yield peers across all significant time periods. Some of the more recent success can be chalked up to the addition of Chang in 2019.

"This team checks all the boxes," Curtin writes. "Veteran manager Mark Notkin has been a stabilizing force, leading the strategy for over two decades. … Chang rose to portfolio management from Fidelity's high-yield research ranks, and his partnership with Notkin helps to ease concerns around the strategy's long-term succession planning."

Learn more about FAGIX at the Fidelity provider site.

• Fund category: Intermediate core bond
• Assets under management: $10.4 billion
• Yield: 3.9%
• Expense ratio: 0.44%

The Gold-rated Fidelity Investment Grade Bond Fund (FBNDX) is "everything you want in a core bond fund," raves Morningstar.

But moreso than any of Fidelity's other top actively managed funds mentioned here, FBNDX's success is truly a team effort.

This intermediate-term core bond fund is currently piloted by a five-person team: lead Michael Plage, as well as co-managers Brian Day, Sean Corcoran, Celso Munoz and Stacie Linda Powell Ware.

"Thoughtful succession planning helps to keep Fidelity Investment Grade Bond among the best core bond offerings," Morningstar's Curtin writes. "Fidelity's core and core-plus-bond management team is still best-in-class as it continues to evolve. Its most recent evolution materialized in 2024's fourth quarter when stalwart manager Jeffrey Moore retired, a departure well-telegraphed earlier in the year."

At that point, Plage, who had been around since 2016, took the reins, and Day, Munoz and Ware came aboard, joining Corcoran, who was added in 2022.

Oh, right! You probably wonder what the fund does.

Fidelity Investment Grade Bond Fund's 4,600-plus holdings are spread across a number of "core" bond categories, including U.S. Treasuries (45%), investment-grade corporates (25%), mortgage-backed securities (MBSes, 15%), and more.

It's an ideal product for getting most if not all of one's bond exposure, putting it among Fidelity's top retirement funds, too.

FBNDX has bested its category and Morningstar benchmark index over all medium- and long-term time periods, and it's among the top 10% of funds in its category over the trailing 10- and 15-year terms.

Learn more about FBNDX at the Fidelity provider site.

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Vanguard funds are known as practical tools for the buy-and-hold-forever crowd. Their straightforward strategies, broad portfolios and generally low costs are conducive to investors who want to sit back and let the rule of compounding do the work for a decade or two.

In a pinch, the safest Vanguard funds can also be used to play a little defense.

How we chose the safest Vanguard funds

To find the safest Vanguard exchange-traded funds (ETFs) and mutual funds for a volatile market, we looked for those that represent some of the most useful defensive sectors and strategies, including those that contain the best dividend stocks or the best health care stocks.

We also targeted funds that boast Vanguard's below-average expenses. "True, some competitors can now match or even undercut Vanguard on fees for broad market exposure," writes Alec Lucas, director of manager research and active funds research for Morningstar. "But Vanguard's burgeoning advice business could help it keep or even extend that lead."

Remember that when it comes to positioning your portfolio for volatility, markets eventually stabilize. If you do jump into the safest Vanguard funds for short-term defense, pay attention and be nimble.

With that in mind, here are five of the safest Vanguard funds to own in a volatile market. When applicable, we'll let you know when these portfolios come in both ETF and mutual fund form.

Data is as of April 8. Dividend yields represent the trailing 12-month yield, a standard measure for equity funds.

• Type: Sector (Health Care)
• Assets under management: $17.7 billion
• Dividend yield: 1.4%
• Expenses: 0.09%, or $9 annually for every $10,000 invested
• Also available as: Vanguard Health Care Index Fund Admiral Shares (VHCIX, 0.09% expenses, $100,000 minimum investment)

Health care stocks are known for their defensive qualities because of the essential services they provide. If money's tight, you can put off buying a virtual reality headset or a trip to the Bahamas, but you can't exactly go off your medications and avoid the doctor.

Health care spending is projected to grow at a rate that far outpaces inflation. According to the Centers for Medicare & Medicaid Services (CMS), national health expenditures are expected to grow at an average annual rate of 5.6% through 2032.

That's why the Vanguard Health Care ETF (VHT) is one of the safest Vanguard funds to own in a volatile market. Among the best Vanguard ETFs, it's an extremely cost-efficient way to diversify, giving you access to 400 health care stocks for a mere nine basis points in annual fees.

VHT is market cap-weighted, which means the larger a company is by market capitalization, the more assets the fund will invest in its shares. Mega- and large-cap stocks have the biggest impact on performance, at nearly 70% of the fund's weight.

But you also enjoy some exposure to mid- and small-cap stocks, which allows you to benefit from explosive smaller biotech and biopharma names that can take off on events such as drug-trial results and mergers and acquisitions.

Top holdings include pharmaceutical names Eli Lilly (LLY) and AbbVie (ABBV) as well as Johnson & Johnson (JNJ).

Learn more about VHT at the Vanguard provider site.

• Type: Sector (Consumer Staples)
• Assets under management: $8.4 billion
• Dividend yield: 2.2%
• Expenses: 0.09%
• Also available as: Vanguard Consumer Staples Index Fund Admiral Shares (VCSAX, 0.09% expenses, $100,000 minimum investment)

Consumer staples is another sector that tends to be more resilient during volatile markets for the same reason as health care.

If you're in a money crunch, you'll look at a lot of different ways to cut back. You might go to the movies less. You might not go out to restaurants as much. Maybe you'll pare down your five streaming services to four.

You'll look at spending less on just about anything before you cut back on consumer staples such as toilet paper, toothpaste and basic grocery essentials.

That's why the Vanguard Consumer Staples ETF (VDC) is among the safest Vanguard funds for market uncertainty.

This ETF provides exposure to more than 100 companies that specialize in human necessities. Procter & Gamble (PG) tackles everything from facial care to tushy wipes. Mondelez International (MDLZ) sells a bevy of cheap snacks — think Chips Ahoy! and Ritz Crackers — that are mainstays in American pantries.

It also holds Walmart (WMT), Costco Wholesale (COST) and Target (TGT), which sell all of these items.

You'll also find companies such as Marlboro parent Altria (MO) and alcohol giant Constellation Brands (STZ). While you might not consider cigarettes and alcohol to be "necessities," people are just as loath to cut back on them as they are other staples.

As with many Vanguard ETFs, VDC can be had at an absolute song: Expenses are just nine basis points per year.

Learn more about VDC at the Vanguard provider site.

• Type: Dividend stock
• Assets under management: $75.4 billion
• Dividend yield: 2.4%
• Expenses: 0.04%
• Also available as: Vanguard High Dividend Yield Index Fund Admiral Shares (VHYAX, 0.08% expenses, $3,000 minimum investment)

The best dividend stocks have historically outperformed their non-dividend-paying counterparts during market uncertainty.

According to Merrill, dividend stocks can be "particularly useful when markets are volatile." For one, the private wealth management firm says, they provide investors with income, which can help meet their liquidity needs.

Additionally, "dividend-focused investing has historically demonstrated the ability to help to lower volatility and buffer losses during market drawdowns," Merrill adds.

With this in mind, investors might want to consider the Vanguard High Dividend Yield ETF (VYM), which tracks an index of high-yielding dividend stocks. On a total-return basis (price plus dividends), the S&P 500 is down 0.6% since the start of the year, while VYM has gained 6.6%.

This Vanguard fund boasts a wide portfolio of 560 or so high-yielding stocks that collectively yield 2.4% at present. (That's roughly double the S&P 500.)

It's worth noting that, at 19.4% of assets, financial stocks — not really considered safety plays — are the best-represented sector in VYM. But the traditionally defensive health care (12.9%) and consumer staples (9.4%) sectors also carry significant weight in the portfolio.

Top dividend payers in the portfolio right now include blue chip stocks such as Broadcom (AVGO), JPMorganChase (JPM) and ExxonMobil (XOM).

Learn more about VYM at the Vanguard provider site.

• Type: Minimum-volatility global stock
• Assets under management: $1.9 billion
• Dividend yield: 2.1%
• Expenses: 0.21%

Among the most popular ways to fight off a turbulent market are low-volatility (low-vol) and minimum-volatility (min-vol) ETFs.

What's the difference? Low-volatility ETFs evaluate a universe of stocks and pick out the ones that have shown the least volatility over a certain period of time, hoping to create the lowest-volatility portfolio it can.

Minimum-volatility ETFs typically try to minimize volatility within a certain benchmark while still resembling the original benchmark in some way.

For instance, an S&P 500 low-vol fund that picks the 20 lowest-volatility stocks in the index might end up holding nothing but utility stocks.

However, an S&P 500 min-vol fund might try to identify low-volatility stocks, but it might be forced to have at least some percentage invested in all 11 sectors, resulting in a portfolio that's not as volatile as the S&P 500 but possibly not as calm as a low-vol fund.

Vanguard doesn't have many options for investing in either type of strategy, but one that does its job is the Vanguard Global Minimum Volatility Fund Investor Shares (VMVFX). This actively managed fund aims to provide minimum volatility compared with the global equity market.

Like most global funds, VMVFX dedicates the bulk of its assets (56.7%) to American stocks, with the rest spread across several other countries such as the U.K., Canada and Taiwan.

From a construction standpoint, VMVFX exemplifies the minimum-volatility mindset. Its sector allocation looks somewhat similar to the category average but with a few tweaks reflecting its goal of reducing volatility.

For instance, it holds a few more percentage points of health care (13.4%) and consumer staples (10.3%) than the category averages, but a little less technology (21.5%) and consumer discretionary (8.0%).

There is a $3,000 minimum investment for this Vanguard fund.

Learn more about VMVFX at the Vanguard provider site.

• Type: Ultra-short bond
• Assets under management: $8.2 billion
• SEC yield: 4.3%*
• Expenses: 0.10%

We mentioned earlier that when the market's a mess, investors seek income. That can include dividend stocks, but it often includes bonds, too.

Bonds don't hold a candle to stocks when it comes to long-term returns, but they provide much more stability, serve a vital role in protecting your savings and can produce a decent return from their interest payments.

One of the safest bets you can make in bonds, if you're looking to protect your money in a down market, is short-term debt.

Typically, the shorter the payback term for a bond, the less uncertainty there is that debt will be paid off — a lot more can happen during the life of a 30-year bond than during the life of a one-year bond.

Enter the Vanguard Ultra-Short Bond ETF (VUSB), which holds bonds that mature in less than two years.

The Vanguard Ultra-Short Bond ETF is an ultimate example of how useful cheap index funds are. Individual bonds are extremely difficult to research, and they're not exactly easy to buy, either.

But with VUSB, you're plugged into a Vanguard-run portfolio of some 1,260 different debt issues — an instant diversified fixed-income portfolio for just 10 basis points a year.

Another reason VUSB is on this list of safest Vanguard funds? Virtually the entire portfolio boasts investment-grade ratings, which basically means there's an extremely high likelihood that these bonds will be fully repaid.

How steady is VUSB? Shares are up 0.8% for the year to date.

Learn more about VUSB at the Vanguard provider site.

* SEC yield reflects the interest earned for the most recent 30-day period after deducting fund expenses. SEC yield is a standard measure for bond funds

Related content

• The Best Vanguard Bond Funds to Buy
• Best Long-Term Investment Stocks to Buy
• What Is Stagflation and How Can Investors Prepare?

It looked like the market's luck was going to run out Friday as fourth-quarter earnings season kicked off. Stocks opened deep in negative territory after several big banks reported Q4 results. However, the major benchmarks reversed course thanks to a solid reading on consumer sentiment, extending their daily win streaks. 

JPMorgan Chase (JPM, +2.5%) was one of several companies that got the ball rolling this morning. The financial firm reported fourth-quarter earnings of $3.57 per share, up 7.2% year-over-year as rising interest rates boosted core lending income. Revenue, meanwhile, was 18% higher in the final three months of 2022 to $34.55 billion. 

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Bank of America (BAC, +2.2%) delivered impressive results, too, with Q4 earnings per share (EPS) and revenue higher on a year-over-year basis. On the other hand, Citigroup (C, +1.7%) and Wells Fargo (WFC, +3.3%) saw sharp declines in quarterly profit due in part to the banks setting aside more cash to cover potential losses on loans – news that likely exacerbated investors' concerns of a possible recession in 2023. 

This last point may have been what sent stocks sharply lower at the open, but then a solid reading on consumer sentiment helped markets change direction mid-morning. Specifically, the University of Michigan's preliminary consumer sentiment index rose to 64.6 in January from December's final reading of 59.7. Additionally, consumers' expectations on where inflation will be in the next 12 months fell to 4% in January from 4.4% in December, the fourth straight monthly decline. 

"Inflation expectations are well-anchored and improving as pricing pressures are weakening across many sectors," says Jeffrey Roach, chief economist at LPL Financial. "The Fed will likely hike by 0.25% at the upcoming meeting later this month. We shouldn't be surprised if the Fed starts talking about pausing in the near future."

The Dow Jones Industrial Average (+0.3% to 34,302) and the S&P 500 (+0.4% at 3,999) finished higher for a fourth straight day, while the Nasdaq Composite (+0.7% at 11,079) brought its daily win streak to six.

What to Expect This Earnings Season

Earnings season really picks up next week, with more big banks set to report. For the final three months of 2022, estimated earnings for the S&P 500 are expected to decline 3.9%. If this is the actual decline for the quarter, "it will mark the first time the index has reported a year-over-year decline in earnings since Q3 2020," says John Butters, senior earnings analyst at FactSet. 

At this point in Q4 earnings season, 67 S&P 500 companies have issued negative earnings per share guidance, vs. 34 that have given positive EPS forecasts, Butters adds. 

Revenue growth is also expected to have slowed in Q4. According to Butters, revenue growth is expected to be 3.9%, which will mark the slowest pace of growth since Q4 2020. Utility stocks are forecast to post the biggest year-over-year decline in revenues, while industrials and energy stocks are projected to report the biggest annual increases in revenue. Kinder Morgan (KMI) is one of a few energy companies on next week's earnings calendar. Streaming giant Netflix (NFLX) and digital financial firm Ally Financial (ALLY) also highlight the slate.

Warren Buffett's Berkshire Hathaway (BRK.B, $303.20) cut its stake in longtime holding U.S. Bancorp (USB, $44.87) by more than half.

Buffett, who serves as Berkshire Hathaway's chairman and CEO, has been slashing his holding company's exposure to financial stocks – and bank stocks in particular – for years. And although the U.S. Bancorp position hasn't been immune to some recent downsizing in the Berkshire Hathaway equity portfolio, Buffett has left it mostly intact.

That is, until now. 

Berkshire Hathaway sold 56% of its position in the nation's fifth largest bank by assets, a new regulatory filing revealed. Buffett's conglomerate now holds 52.5 million USB shares, or 3.5% of the regional lender's shares outstanding. That's down from an ownership stake of 8.1% prior to the sales. 

Berkshire Hathaway's USB stock was worth $2.4 billion as of Thursday's close, and now accounts for just 0.7% of the Berkshire Hathaway equity portfolio. That's down from 1.8% before Buffett slashed the stake. 

Berkshire, formerly the bank's largest shareholder, now drops to fourth place behind asset management giants Vanguard, BlackRock and State Street Global Advisors.

Buffett First Bought USB in 2006

Not to get sentimental or anything, but U.S. Bancorp is one of the oldest holdings in the Berkshire Hathaway portfolio. Warren Buffett first bought shares in the nation's largest regional lender in the first quarter of 2006. And while he has always been tight-lipped about the USB position, Buffett's actions over the past few quarters have hinted that something like this might be in the offing.

After all, Buffett clipped Berkshire Hathaway's USB stake by 5%, or 6.6 million shares, in the second quarter of 2022. He also pared the stake in each of the first three quarters of 2021.

True, Buffett had been gradually reducing Berkshire Hathaway's exposure to USB. But those scissorings stood in stark contrast to what he's done with so many of Berkshire's other bank stocks.

Mostly, he's taken a hatchet to them.

In just a sample of moves, Berkshire Hathaway dumped what was left of its stake in Wells Fargo (WFC) in the first quarter of 2022, and exited positions in JPMorgan Chase (JPM), Goldman Sachs (GS), PNC Financial Services (PNC) and Travelers (TRV) over the past couple of years. 

To be sure, Warren Buffett is by no means done with big bank stocks. Bank of America (BAC) is Berkshire Hathaway's second largest holding after Apple (AAPL). The nation's second largest bank by assets accounts for 10.2% of Berkshire's total portfolio value. 

Berkshire Hathaway also owns 55.2 million shares in Citigroup (C), a position that Warren Buffett initiated in the first quarter of 2022. At 0.8% of the portfolio, Citigroup is one of Berkshire Hathaway's 15 largest investments. 

Other financial sector stocks in the Berkshire Hathaway equity portfolio include American Express (AXP), Bank of New York Mellon (BK), Mastercard (MA), Visa (V) and Ally Financial (ALLY), among others.

What This All Means

The bottom line is that U.S. Bancorp stock is a long-time market laggard, and so perhaps we shouldn't be too surprised that Warren Buffett decided it was time to dramatically lighten up on the position. We'll learn more of what the world's greatest long-term investor has been up to when Berkshire Hathaway reports its third-quarter buys and sells on Monday, Nov. 14.

For now, all we can say for certain is that Berkshire Hathaway stock has been a market-beating buy this year. Operating earnings expanded 20% in the third quarter, helping to bolster BRK.B's case as one of the best stocks to buy for a bear market. 

It's also fair to assume that this isn't good news for USB stock. If Warren Buffett's recent history with big banks stocks offers any sort of guide, Berkshire Hathaway might be putting even more USB shares on the market soon.

Stocks closed lower Friday, with the Dow Jones Industrial Average falling 1.3% to 29,634, the S&P 500 Index shedding 2.4% to 3,583, and the Nasdaq Composite surrendering 3.1% to 10,321.

Today's decline had the major market indexes paring the gains earned in Thursday's whipsaw session, and secured weekly losses for the Nasdaq (-3.1%) and S&P 500 (-1.5%). The Dow, on the other hand, finished with a weekly advance of 1.2%.

Stocks started the day higher, but turned south after the University of Michigan consumer sentiment index edged up to 59.8 in October from September's reading of 58.6 – continuing its rise off the all-time low reading near 50.0 from June.

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"Consumer sentiment rose in early October as views of current conditions improved," says Tim Quinlan, senior economist at Wells Fargo Securities. "Inflation expectations continue to be the key component of this release, and though both short- and long-term expectations rose, importantly long-term expectations remain at a level the Fed will still consider well-anchored."

Time to Buy Bank Stocks?

Bank earnings were another area of focus for investors today. Major financial firms JPMorgan Chase (JPM, +1.7%), Citigroup (C, +0.7%) and Wells Fargo (WFC, +1.9%) headlined this morning's earnings calendar – marking the start of what's expected to be a dreary earnings season. 

Results from three of the country's largest banks largely beat expectations, and the stocks responded in kind.

Additionally, JPMorgan CEO Jamie Dimon "made several comments regarding the bank's ability to manage capital expressing confidence that any negative impacts in the macro environment, risk-weighted asset levels, or AOCI can be easily handled by the current capital levels and earnings power of the company," says David Wagner, portfolio manager at Aptus Capital Advisors. "We saw the underwriting standards were not really loosened earlier so no 'tightening' is needed or being performed at this time, which is a great component of this high-quality bank."

As for Citigroup, "a lower cost of capital and net investment income is the microcosm for the beat in our opinion," Wagner adds.

Given this strength on and off the charts, many investors may be wondering if it's time to buy beaten-down bank stocks? Here, we take a look at what analysts are saying about JPM, C and WFC.

If better-than-expected quarterly results from three of the nation's biggest financial firms are any indication, there might be bargains lurking among bank stocks.

JPMorgan Chase (JPM, $112.92), Wells Fargo (WFC, $43.89) and Citigroup (C, $43.55) marked the unofficial opening of the third-quarter earnings season on Friday, and they did so on an upbeat note. 

Indeed, all three big banks exceeded Wall Street's earnings per share estimates, and by wide margins at that.

Shares in the three lenders rose sharply on the news, even as the broader market sold off. True, the market pretty much always overreacts – both to the upside and downside – in the immediate aftermath of a news event such as earnings.

But the buoyancy exhibited by JPM, WFC and C after their respective earnings reports might just mean that bank stocks have been beaten down beyond reason heading into what is widely expected to be a brutal third-quarter earnings season. 

JPM's Bottom Line Beats the Street

JPM, a component of the Dow Jones Industrial Average and nation's biggest bank by assets, reported a less-than-feared 17% drop in third-quarter profit on Friday, as a jump in interest income cushioned a blow from higher loan loss provisions and a slump in dealmaking due to a worsening economic outlook.

Typically, rising interest rates are good for banks because they can charge consumers more, but the broader risk of an economic slowdown and higher cost of borrowing could cloud the economic outlook and hurt future earnings.

Chief Executive Jamie Dimon said in a statement that American consumers continue to spend and businesses remain healthy.

However, he added there were "significant headwinds immediately in front of us," noting stubbornly high inflation leading to higher global interest rates, the uncertain impacts of quantitative tightening, the war in Ukraine and the fragile state of oil supply and prices.

"While we are hoping for the best, we always remain vigilant and are prepared for bad outcomes."

For the quarter, JPMorgan's profit fell to $9.74 billion, or $3.12 per share. Revenue rose 10% to $32.72 billion, helped by a 22% increase in revenue from fixed income trading.

The bank's adjusted profit was $3.36 per share, well above analysts' average estimate of $2.88, according to Refinitiv data.

Credit Suisse analyst Susan Roth Katzke said "simply put, JPMorgan delivered a solid set of results, from top to bottom."

Citigroup and Wells Fargo Also Join the Beat Parade

Citigroup, the nation's third-largest lender by assets, reported net profit of $3.5 billion, or $1.63 per share, in the three months ended Sept. 30. Analysts on average had expected a profit of $1.42 per share. 

True, the bank reported a 25% year-over-year drop in third-quarter profit, hurt by having to set aside more funds to cover soured loans from a potential economic downturn and a slump in investment banking business. However, signs abound that Citigroup's turnaround efforts are beginning to bear fruit. 

Meanwhile, analysts were also too pessimistic about Wells Fargo. The nation's fourth-largest bank reported a 31% decline in third-quarter profit, hurt by costs related to a fake accounts scandal and higher loan-loss reserves.

Yet, like its fellow bank stocks, WFC beat estimates. On an adjusted basis, the lender earned $1.30 per share, or far more than the Street's forecast for $1.09 per share.

Of these three bank stocks, only WFC is beating the broader market so far this year. Shares in Wells Fargo were off almost 12% for the year-to-date through Oct. 13. JPM and C were down 31% and 29%, respectively, over that span, while the S&P 500 was off 23%.

Meanwhile, Buy Calls Abound on the Street

Anytime a stock sells off that hard, bulls can usually point to valuation as a reason to be constructive on a name. Happily for bulls, these banks' quarterly reports make such arguments even more convincing. 

And not for nothing, but industry analysts were already collectively optimistic about these three bank stocks at their current levels.

JPM carried a consensus recommendation of Buy heading into its third-quarter earnings report, albeit with somewhat mixed conviction. Of the 26 analysts issuing opinions on the stock tracked by S&P Global Market Intelligence, 10 rated it at Strong Buy, six said Buy, nine had it at Hold and one called it a Strong Sell. 

Citigroup also scored a consensus Buy recommendation, with seven Strong Buy calls, two Buys, 14 Holds and one Strong Sell. 

WFC, meanwhile, sported a consensus recommendation of Buy with high conviction. Of the 26 analysts issuing opinions on the stock tracked by S&P Global Market Intelligence, 12 called it a Strong Buy, nine said Buy and five called it a Hold. 

And make no mistake, we're already seeing some analyst upgrades on these bank stocks roll in. CFRA Research upgraded WFC to Hold from Sell on Friday thanks to the bank's third-quarter results. 

The Bottom Line

If there was a sliver of a silver lining to be found heading into what is forecast to be the worst earnings season since the height of the COVID-19 pandemic, it was this: Analysts' estimates were so low that companies should be able to trip over them.

If nothing else, results from JPM, C and WFC accomplished exactly that – at least as far as bank stocks are concerned.

Reuters reporters Mehnaz Yasmin, Lananh Nguyen, Niket Nishant and Noor Zainab Hussain contributed to this article.

Is your broker helping you be a better investor? That was the key question we sought to answer as we rolled out our annual online broker survey.

After all, fees don't matter much anymore. They're low everywhere. So, what's left? Service.

Does your broker provide the tools you need to help you keep track of your financial life and goals? In big and little ways, is it guiding you toward smarter investment decisions? Did you learn anything new about investing from your broker over the past year? Can you get investment advice if you want it?

Can you graduate from an automated adviser to a dedicated financial adviser as you get older to get help with estate planning or Social Security? All told, we engineer our broker rankings to reward the firms that offer the most to the broadest group of investors.

How we chose the best online brokers and trading platforms

To start, we limit the field to brokers that offer stock, mutual fund, exchange-traded fund and individual bond trading. That's one reason you don't see the likes of Robinhood or SoFi here – you can't buy individual bonds on their platforms.

We surveyed nine firms in all: Ally Invest, Charles Schwab, E*Trade from Morgan Stanley, Fidelity, Firstrade, Interactive Brokers, J.P. Morgan Self-Directed Investing, Merrill Edge, and WellsTrade. T. Rowe Price, Vanguard and Citi Self Invest declined to participate.

The biggest, best-known firms score better overall, you'll notice. But each firm shines in one category or another, and no firm aced every one.

Best online broker overall

Drum roll, please. Fidelity landed on top this year by offering a solid mix of investment products, as well as tools and calculators for retirement planning and college savings, among other things.

The firm's fees are far from the lowest, especially if you want to buy shares in a mutual fund for which you must pay a transaction fee. But it was a competitive finisher in primary categories – investment choices, tools and education, and mobile app. And it won major points for its full range of advisory services, which pushed it to the top spot.

Interactive Brokers finished second for the second year in a row. The firm ranked first or second in the most important categories – investment choices, mobile app, and tools and education – and that helped lock in its position in the rankings.

We evaluated its "Lite" pricing plan and its website-based platform, Client Portal. But many of the firm's customers are active traders – defined by the firm as investors who make more than 120 trades per year – and they usually opt for the firm's "Pro" pricing plan and download its desktop trading platform, not considered here.

What's more, Interactive is known for its access to international markets – more than 160 developed and emerging markets – and 71% of its account holders live outside of the U.S. They're mostly interested in trading in the U.S. as well as their local markets, the firm says.

Bear in mind that our survey results combine objective and subjective criteria. We rely on the information that each firm provides, vetting the data as best we can. The scoring boils down to the weighting we assign to each data point and to each category.

Although we base our weightings on what we hear from investors and the industry about what brokerage customers currently value, not everyone will agree with what we chose to play up – or down.

Below, we walk you through the highlights and lowlights of how the brokers performed in each of our categories, listed in order of significance to the final score.

Online brokers with the best investment choices

More is more in this category: The broader the range of investment offerings, from corporate bonds to mutual funds, ETFs and even cryptocurrencies, the better the broker ranked in this category, which makes up 20% of the final score.

Fidelity and Interactive Brokers came out on top. In addition to a robust roster of the usual securities available, both firms also offer better yields than peers on cash that's sitting idle in brokerage accounts (the so-called sweep account).

You can also buy a fraction of nearly every publicly traded U.S. stock or ETF. So instead of shelling out more than $1,000 for a single share of Netflix (NFLX) stock, for instance, you can buy a $1 slice (roughly 0.001% of one share). And you can set up a recurring purchase of shares in ETFs and stocks.

Plus, though it didn't count for much in this category score, Fidelity and Interactive Brokers were the only firms in the survey to offer cryptocurrency trading of select digital coins – the actual currency, not crypto futures or ETFs that track cryptocurrency prices. (Schwab says it expects to offer direct access to crypto in 2026.)

For the record, fractional-share trading is available at other firms, too, but to varying degrees. At Firstrade, customers can buy slices of nearly every publicly traded stock and more than 1,200 ETFs.

Schwab customers can only buy slices of S&P 500 stocks; at J.P. Morgan Self-Directed, fractional purchases are limited to S&P 500 and Nasdaq-100 stocks and all ETFs; and E*Trade investors can buy fractions of 221 ETFs for a $25 minimum investment.

Of course, not every investor wants or even needs access to every investable security. Mutual fund investors will find abundant choices at Charles Schwab, Fidelity and Interactive Brokers, for instance. And buyers of individual corporate bonds will find the greatest number of choices at E*Trade. Municipal bond investors should go to Interactive Brokers or E*Trade.

Want to invest in foreign stocks? You're out of luck at most of the firms we surveyed; only Schwab, Fidelity and Interactive offer access to foreign markets.

Ally Invest, E*Trade and Merrill Edge suffered because they don't offer fractional-share trading of stocks. WellsTrade does, it's worth noting. But Wells and Merrill also slipped, in part, because each of their platforms offers a below-average number of mutual funds and corporate and municipal bonds, relative to other survey respondents.

Online brokers with the best tools and education

How helpful is your broker at keeping you on track with your investment plan and the rest of your financial life?

In this category, which accounts for 20% of the final score, we asked each firm whether they offered certain tools or calculators that assist in a variety of financial goals: How much should I save for college tuition? How am I doing so far on retirement savings? Can I get help building a bond ladder, figuring out how much to withdraw each year from my IRA, and reviewing the asset allocation of my entire investment portfolio?

Calculators, portfolio analyzers, screens for stocks, ETFs and mutual funds, and the like can help investors put their money to work. We scrutinized the array of educational videos, webinars, podcasts and live events, too.

Schwab and Interactive Brokers triumphed in this category. Of the nearly 40 tools and functions we queried each firm about, Schwab offers 33, including savings, tax and retirement calculators and other useful tools, such as a bond-laddering tool and a trade ticket that can be filled out and saved for later. (E*Trade offers a saved trade ticket function, too.) Interactive Brokers finished with 30.

Many are embedded in the firm's retirement-planning tool (such as budgeting and debt management) and portfolio analyst tool (such as getting an aggregate view of asset allocation and risk in your portfolio).

Both firms also got a lift from good scores on the education front. We asked the firms about educational articles and videos available on their websites, as well as how many podcasts and videos were posted in 2024. Schwab and Interactive both scored well, which helped them win the top spots in this category.

But it's worth noting that Fidelity and E*Trade were nearly as strong on education, too. E*Trade, in particular, offers a daily podcast of five minutes or less from Morgan Stanley that covers commentary on the market and other investing topics. Recent podcast headlines: "Trump's AI Action Plan"; "Will the Entertainment Business Stay Human?"; and "Asia's $46 Trillion Question."

The laggards in the tools category were Ally Invest, Firstrade and WellsTrade. They trailed the pack in the overall number of tools offered – Ally with just 11; Firstrade with 16; and Wells with 17.

Ally Invest, for instance, doesn't offer a mutual fund screener, a spending-tracker tool or a "How am I doing?" retirement-savings calculator. WellsTrade offers more than Ally in the way of tools, but you can't export statements to Excel, for instance, and it doesn't include some tools, such as one that would help investors as they start to withdraw cash for retirement.

But Wells and Ally also missed on the education side. Unlike the other firms surveyed, for instance, WellsTrade doesn't provide any educational articles on investing and trading strategies, podcasts, or educational videos.

Ally Invest fared a bit better than Wells because it does provide educational articles, but it lacks the podcasts, videos and other events that the bigger players offer their customers.

Online brokers with the best mobile app

Most brokerage customers log in to their accounts in the mobile app more often than they do on a computer, according to some of the firms we surveyed this year.

They may be just checking their portfolio balance in the middle of the day. Even so, as apps improve, we expect that investors will want to perform more and more investing tasks on their phones over time. So in this category, which makes up 20% of the final score, we explored the breadth of functionality of each firm's mobile app.

The ability to trade stocks, ETFs and mutual funds is a given; every firm's mobile app allows you to do that. And access to stock research reports in the app is pretty much de rigueur.

But can you buy stakes in bonds and crypto in the app? Does it offer stock and ETF screening, for instance, as well as a shortlist of prescreened investments to consider? Can you select specific shares you own in a stock by tax lot before you sell? Can you access a similar variety of savings, retirement, budgeting and portfolio analysis tools that are available on the broker's website? Can you deposit checks electronically into your brokerage account?

Interactive Brokers answered yes to more of our nearly 60 queries than any other firm. It won this category by a clear margin, thanks to a robust array of retirement calculators, tools for tracking spending and college savings, and a bond screener on its app.

E*Trade's offering was similarly robust; it was the only other firm to offer a bond screener on its mobile app, for one thing. It came in second, followed by J.P. Morgan Self-Directed in third place and Fidelity in fourth.

Some of the firms' apps are strong in other ways. All but three of the firms allow you to measure your portfolio's performance against a benchmark, for instance (Ally Invest, Firstrade and WellsTrade are the holdouts).

We'd be content with just three benchmarks – one for U.S. stocks, another for U.S. bonds, say, and a foreign stock market bogey. But at Interactive, you can choose among 340 in the mobile app; Merrill Edge, 35; and J.P. Morgan Self-Directed, 12. Compare that with the five indexes available in Schwab's app and three in Fidelity's and E*Trade's mobile apps.

Meanwhile, for investors in search of investing ideas, only J.P. Morgan and E*Trade offer curated lists for stocks, ETFs and mutual funds on the app.

Fidelity, for instance, has select lists available in its app for mutual funds and ETFs, but not stocks. J.P. Morgan shines again for screeners. It's the only firm, along with Interactive Brokers, to offer screeners for stocks, ETFs, mutual funds and bonds in its mobile app.

Online brokers with the best advisory services

Many investors these days want help with their investments. Brokerage firms tend to offer tiers of service. These range from an all-digital, or automated, service (call it a robo service) to a blend of digital and a little human advice – what we call a hybrid offering – to a more full-service type of account that in some cases offers customized portfolios and a dedicated investment adviser.

We scrutinized the full gamut of offerings at each firm by dividing the overall advisory category into three parts – digital, hybrid and full service. The overall category accounts for 12.5% of the final score; digital service makes up just over half of the category score, and hybrid and full services account for the rest of the category score.

The range of advice varies at each firm. Firstrade doesn't offer any investment advice at all. And most firms offer only two of the three tiers of advice. J.P. Morgan Self-Directed, for instance, doesn't have a robo, but it offers a hybrid service as well as full-service-type plans through J.P. Morgan Wealth Management.

Merrill Edge has a robo (Merrill Guided Investing) and a hybrid (Merrill Guided Investing with Advisor). But it doesn't offer full-service advice – though that is available at a different Merrill business.

Similarly, Wells Fargo's WellsTrade has Intuitive Investor, its all-digital advisory, but no full-service advice. That's available through a different Wells business, so it wasn't included in the survey.

The only two firms to offer all three tiers of advisory services – again, digital, hybrid and full service – ran away with the medal in this category: Fidelity and Schwab. Indeed, Fidelity seems to have an advisory service to suit every kind of investor and account size. The breadth of offerings helped Fidelity come out ahead in this category. But in truth, both Fidelity and Schwab stood out in each tier, winning the top spots across the board.

Bear in mind that our scoring system weighed the nuts and bolts of the services at each firm – investment minimums, variety of portfolios, fees, expense ratios of fund holdings and access to estate-planning experts, among other things – not the portfolio returns.

Let's start with digital and hybrid services. Fidelity offers two kinds of automated advice: Fidelity Go and Fidelity Managed FidFolios. But Fidelity Go steals the show. For as little as $10, customers can get access to 16 different kinds of portfolios filled with funds that charge 0% expense ratios. What's more, accounts with less than $25,000 pay no advisory fee.

Managed FidFolios is a more sophisticated introductory offering – a team of experts manage an all-stock portfolio for you – and requires $5,000 to start. Choose among three actively managed strategies (which charge 0.70% each in annual advisory fees) and five direct indexing portfolios (0.40%), a strategy that involves owning the individual securities that make up a benchmark, instead of owning a mutual fund or ETF, which allows for active tax-loss harvesting (selling losers to offset gains elsewhere).

Fidelity's hybrid service is part of its Fidelity Go offering and kicks in when balances top $25,000. The fee jumps to 0.35% of assets per year, but that gets you unlimited one-on-one "financial coaching to help achieve retirement or other investing goals," according to the firm. Many of those coaches are certified financial planners.

By contrast, in its favor, Schwab's robo, Intelligent Portfolios, charges no annual advisory fee, and investors can choose among 81 diversified portfolios filled with cheap ETFs. Schwab's next step up in service, like Fidelity's, requires a $25,000 minimum. Intelligent Portfolios Premium, as it's called, requires a one-time $300 planning fee on top of a $30 monthly advisory charge. You get the same 81 diversified ETF portfolios as in the robo-advisory service, but the big plus is you have access to a team of financial planners.

At most firms, you must fork over more money to get a dedicated human adviser. That minimum varies from $100,000 at Ally Invest and J.P. Morgan Self-Directed to $500,000 at E*Trade, Fidelity and Schwab. (Firstrade, Interactive, Merrill and Wells don't offer these services.)

At the full-service level, Schwab offered most of the features we were looking for: A dedicated adviser, one-on-one access to specialists for bond and options trading as well as an estate-planning expert, and low advisory fees. For an account with a $750,000 balance, Schwab charges just 0.80% a year.

E*Trade and J.P. Morgan each had competitive offerings at the full-service level. J.P. Morgan has a lower minimum going for it – typically $100,000 for a dedicated adviser – plus access to experts on estate planning and bond and options trading, and a customized portfolio. And investors can choose among advisers at Chase bank branches and at different divisions of J.P. Morgan Wealth Management. Some charge annual advisory fees as low as 0.50% for a $750,000 balance; others cost more (as much as 1.45% a year).

E*Trade's full-service offering from Morgan Stanley Wealth Management stacked up nicely, too, with multiple experts at the ready to help you. Its 2% annual advisory fee for an account with a $750,000 balance was high, however. E*Trade says Morgan Stanley financial adviser rates vary, so it chose the highest rate by default. Of course, in exchange, you get access to Morgan Stanley's full breadth of products and services.

Online brokers with the best research

What some investors consider useful research may be gobbledygook to others. Some may put greater emphasis on technical analysis, for example – the practice of identifying trends or patterns in price charts to spot investing risks and opportunities.

Others may favor fundamental analysis, examining a company's financial statements and industry trends, say, to evaluate it as a potential investment. And then there are those who might find that news alerts and stories can be useful for pinpointing investing prospects, too.

To that end, in this category (12.5% of the final score), we asked the brokers to list the research sources they offer their customers for specific single stocks – Apple (AAPL), Goldman Sachs (GS), Honeywell International (HON), Alibaba Group Holdings (BABA) and WD-40 (WDFC) – as well as the SPDR S&P 500 ETF (SPY) and the Fidelity Contrafund (FCNTX).

We also asked about how many stock and bond market outlook reports were available to do-it-yourself brokerage customers, as well as any ongoing market commentary or analysis. We gave extra credit to firms that provide access to in-depth fundamental research (because that's the kind of research we favor).

That last question helped boost the scores of some firms, including E*Trade, Merrill Edge, Schwab and J.P. Morgan Self-Directed.

Merrill Edge offers access to proprietary analysis of single stocks from BofA Global Research, but only to customers who meet a $100,000 balance threshold. BofA market outlook and commentary reports, however, are available to all customers. We knocked the firm (only by a bit) for this balance requirement, but it was enough to push the firm from a first-place tie with E*Trade to a second-place finish.

Schwab finished a nose behind for third. Schwab offers brokerage customers solid bond and stock market outlooks and commentary from its asset management division, but we discounted Schwab's proprietary stock reports a little because the stock ratings are based on quantitative, not qualitative, measures.

Interactive Brokers blows away the competition with the stratospheric number of research resources it offers its retail customers: 57 reports on Apple and 38 for Goldman Sachs, for example, and a whopping 1,452 for reports on the outlook for the bond market.

By contrast, among all of the firms we surveyed, the median number of reports was three each for the single companies and two for bond market outlooks. But Interactive missed getting extra credit for in-depth fundamental stock analysis, and that's why it finished behind E*Trade, Merrill and Schwab.

Online brokers with the best customer service and security

In our digitized world, customer service takes many shapes. There's chat and email. You can pick up the phone. In some cases, you can even talk face-to-face with a human being at a local branch. No matter the method, one thing's for sure: When you have an investing-related question that you can't answer on your own, you want a prompt answer. Period.

That's why this category, which amounts to 10% of the final score, included questions such as the average telephone hold time for a customer service representative and average email and chat response time.

We also asked about the percentage of time that a customer was able to get an answer to their question at the first point of contact with a live representative, among other questions.

Charles Schwab won for customer service thanks to its 400 branches, a phone line with 24/7 live service, a 33-second average hold time on the phone (below the average 65-second hold time for the firms we surveyed), and a less-than-12-hour response time for email queries (below the average 33-hour response period). Thousands of clients walk into Schwab's retail branches a day, the firm says, and over the first half of 2025, it fielded more than 14 million calls.

Merrill Edge came in second. On top of a 24/7 live representative customer-service line, the firm says that it has a 90% success rate in answering customers' questions at the first point of live contact. It was the best response rate of the group, just ahead of Ally Invest (89%).

To be fair, we should note that some firms didn't disclose this figure, including Fidelity, Firstrade and J.P. Morgan Self-Directed.

J.P. Morgan Self-Directed was hot on Merrill's heels, boosted in large part by a robust training program for its representatives. Depending on the representative's role, the firm says, some training programs last for two-plus years. A below-average phone-line hold time of less than 30 seconds and a roughly 12-hour average response time to email queries helped, too.

Firstrade, Ally Invest and WellsTrade faltered in this category for different reasons. Each of the firms reported shorter training periods for representatives than the other brokers, for a start. Ally and Wells also reported above-average wait times for representatives on the phone.

Security accounts for one-tenth of this category's score, but it's a growing concern as scammers and hackers get better at what they do. We gave extra credit to firms that make two-factor authentication mandatory, namely Ally Invest, E*Trade, In-teractive Brokers and J.P. Morgan Self-Directed. The extra step can be annoying, but it is becoming increasingly necessary.

To be clear, the other firms in the survey offer two-factor authentication as well; you just have to opt in and set it up.

Online brokers with the best commissions and fees

A little over a decade ago, this category accounted for 25% of the final score. This year, commissions and fees make up just 5%. Everyday investing transactions – buying and selling stocks, shares in ETFs or mutual funds, and bonds – are free, or nearly so. And the tasks that do incur a levy – wiring money, say, or having a representative place a bond or options trade for you over the phone – are likely to be infrequent.

And yet, there are some hidden trading costs. Embedded in the price of an individual bond you buy, for instance, may be a transaction cost, such as a markup (the difference between the price a broker-dealer paid to buy a bond and sell it to an investor) or a selling concession (a fee paid to the seller or distributor of the bond you're buying).

Similarly, the brokerage firm may receive a small payment to route trades to certain securities dealers, which can cost you in the form of slightly less favorable prices. These levies are small, but they can add up, and what you don't outlay in fees you can put to work toward your investing goals. So we asked the firms about these hidden transaction costs, among other charges, as well as what they charge for margin interest rates and options contracts.

As expected, the contest was tight. J.P. Morgan Self-Directed skated past the others, largely because it charges middle-of-the-road fees – rarely the highest or lowest on any query. FirstTrade, on the other hand, though it ranks seventh in the pack on fees, boasts the lowest charge for broker-assisted stock and ETF trades ($19.95) and options contracts ($0).

WellsTrade brought up the rear in this category. Its margin rates are above average and bond purchases include a markup, among other things.

Best online brokers for your specific needs

Best for index fund lovers. Fidelity and E*Trade both have suites of zero-fee index funds, but only individual investors with brokerage accounts at those firms can buy them.

Fidelity has four zero-fee index funds – a total market index fund, an in­ternational stock fund, a small-company stock fund and a large-company stock fund.

E*Trade has five no-fee index funds available exclusively to self-directed E*Trade investors. If you start working with a Morgan Stanley adviser, you can take them with you (E*Trade has been a Morgan Stanley-owned company since 2020). The five funds include strategies that track the performance of international markets, U.S. bonds, municipal bonds, large-company shares and the total stock market.

Best for individual bond buyers. Of all the firms in our survey, Interactive Brokers offers the greatest number of municipal bonds. But buyers of corporate debt should consider E*Trade. What's more, both firms charge no markup on corporate or muni bond transactions. At E*Trade, Treasuries trade for no fee.

Best robo advisory. Fidelity prevails with its digital offering, Fidelity Go, which charges no annual advisory fee for balances under $25,000 and includes 16 different portfolios (from conservative to aggressive allocations). The kicker: The portfolios hold only no-fee mutual funds, so you're not shelling out anything in annual expense ratios.

Fidelity gets another nod, too, because its most aggressive Fidelity Go portfolios hold 100% of assets in stocks (other firms have a 94% to 96% allocation to stocks).

But Schwab Intelligent Portfolios merits an honorable mention. There's no annual fee, though it takes $5,000 to open an account. And the 81 available portfolios hold low-fee exchange-traded funds that charge annual expense ratios between 0.04% and 0.16%.

Best all-in-one bank and broker. Several firms offer benefits to customers who bank and broker with them. But Merrill Edge and its parent, Bank of America, through its Preferred Rewards program, offer the best benefits.

We like, for instance, that the bonuses start when you have a three-month combined average daily balance of just $20,000 – at the bank and in any Merrill investment account. The pluses include a bump in cash rewards on Bank of America credit cards, priority on customer service phone lines, and interest rate discounts on auto loans and home equity lines of credit.

As your balance grows, the perks improve and expand. When your average daily balance hits $100,000 or more, on top of bigger interest rate breaks on loans and bonuses on credit card rewards, you can get a discount on robo-advisory fees at Merrill Edge, a boost in the interest rate on a Bank of America Advantage Savings account and a waiver on ATM fees at non-BofA banks in the U.S. and anywhere else in the world.

Best for options traders. Active options investors should favor Firstrade, which doesn't charge a contract fee like the others. Most of the other firms we surveyed charge a 0.65-cent fee per contract. Ally Invest is one exception; it charges a 0.50-cent contract fee.

Best for cash hoarders. Fidelity gets kudos for paying the highest yield on idle cash sitting in brokerage accounts. In late May, the firm's so-called sweep accounts – the account that your broker automatically "sweeps" any cash into – paid a 3.94% yield. Some of the other firms, by contrast, offered a 0.01% yield. Interactive Brokers stood out, too, with a 2.83% yield on its sweep account.

Best for investors just getting started. None of the firms we surveyed require a minimum to open an account, but we favor Fidelity for investors with small balances for a couple of reasons.

For starters, for as little as $1, you can buy slices of more than 7,000 stocks and exchange-traded funds. No other firm except Interactive Brokers can match that. The other plus: The firm's digital advisory service, Fidelity Go, has the lowest minimum – just $10 – to get started. In addition, there's no annual advisory fee if your balance is below $25,000, and the funds in the portfolios don't charge annual expenses.

Best for mutual fund investors. Interactive Brokers and Schwab offer the biggest roster of mutual funds for no load and no transaction fee. But we want to give Ally Invest, E*Trade, Firstrade and J.P. Morgan Self-Directed a shout-out, too.

All the funds on each of these platforms – albeit a shorter list of funds than Schwab or Interactive offer – trade for no fee.

Best for margin traders. If you're big into trading on margin – a strategy that allows an investor to borrow money from a brokerage firm to purchase securities – Interactive Brokers' Lite tier charges just 6.83% for a margin balance of less than $100,000, a little over half the going rate at the other firms for the same balance.

Best for investors with foreign addresses. Americans living abroad sometimes have problems opening brokerage accounts at U.S. financial firms. But at Interactive Brokers, citizens and residents of nearly every country can open accounts.

And the firm offers overnight trading of stocks and ETFs from 8 pm to 3:50 am Eastern Standard Time, Sunday through Friday, which makes it more convenient for overseas customers in faraway time zones to buy and sell shares.

Best for ETF investors. Stick with Fidelity, Interactive Brokers and J.P. Morgan Self-Directed, which allow you to buy and sell fractional shares of thousands of ETFs. (Firstrade and E*Trade allow you to buy slices of ETF shares, too, but fewer funds are available.)

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Stocks' volatility continued Thursday, sparked by a weak start to second-quarter earnings season and another sizzling inflation update.

On the earnings front, JPMorgan Chase (JPM, -3.5%) this morning said profit in the second quarter was down 28% from the year-ago period, while revenue rose a modest 1%. The financial firm also said it is suspending stock buybacks in order to boost its capital reserves. Fellow big bank Morgan Stanley (MS, -0.4%) also saw its profit sink – down 29% year-over-year – while revenue plunged 11%.

Also in focus today was the latest reading of the producer price index (PPI), which confirmed what Wednesday's scorching consumer price index (CPI) report already told us: Peak inflation was not reached last month. Data from the Labor Department showed that the PPI, which measures how much suppliers are charging businesses and their customers for their goods, surged 11.3% year-over-year in June, its seventh straight month of double-digit annual percentage gains. On a sequential basis, wholesale prices were 1.1% higher.

One positive from the report was that the core PPI, which excludes the volatile energy and food sectors, was up 0.3% over the prior month – or down slightly from May's 0.4% increase.

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"It’s clear that food and energy are driving PPI higher, as was the case in yesterday's inflation print," says Peter Essele, head of portfolio management for Commonwealth Financial Management. "When removing these volatile components, PPI appears to have peaked and is starting to roll over, a tell-tale sign that the economy is shifting into late-cycle territory. The probability of a 100-basis-point hike from the Fed in late July has greatly increased after the two price index releases."

The one-two punch had stocks wallowing deep in negative territory for most of the morning, but the major benchmarks climbed well off their session lows by the close. The S&P 500 Index (-0.3% at 3,790) and Dow Jones Industrial Average (-0.5% at 30,630) still suffered their fifth straight loss, however, while the Nasdaq Composite ended marginally higher at 11,251.

Other news in the stock market today:

• The small-cap Russell 2000 slumped 1.1% to 1,707.
• U.S. crude futures shed 0.5% to finish at $95.78 per barrel.
• Gold futures slumped 1.7% to $1,705.80 an ounce, their lowest settlement since March 30, 2021.
• Bitcoin climbed 4.9% to $20,603.56. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Conagra Brands (CAG) fell 7.3% after the packaged food maker reported fiscal fourth-quarter revenue of $2.91 billion, below analysts' consensus estimate for revenue of $2.93 billion. However, CAG's adjusted earnings of 65 cents per share beat the average estimate by 2 cents. The company also said it plans to raise prices in the second quarter of fiscal 2023 in order to offset higher costs related to inflation. CFRA Research analyst Arun Sundaram maintained a Buy rating on the consumer staples stock after earnings. "We expect margins to improve in FY 23 with more pricing flowing through and cost inflation likely approaching its peak," the analyst says. "Also, cost savings should be easier to realize in FY 23 as the overall supply chain stabilizes. Together, we see more upside than downside to CAG's FY 23 bottom-line targets as the fiscal year progresses."
• Energy stocks suffered notable losses as crude futures continued to slide. APA (APA, -4.0%), Diamondback Energy (FANG, -3.5%) and EOG Resources (EOG, -3.6%) were just a few of the day's biggest decliners.

Play Green Energy Stocks for Long-Term Growth Trends

Market volatility is likely to continue for the time being, which creates an especially uncertain environment for investors. "Inflation has taken a bite out of stock and bond markets – and the bite may not be over quite yet," says Liz Young, head of investment strategy at SoFi. "Before the end of the month, we could get negative earnings guidance, a 75-100 basis point hike from the Fed, and a negative Q2 GDP print. This scenario could prove to be bad news for markets, but good news for buyers."

Although Young suggests investors "don't swing for the fences," she does believe that "we have to start swinging the bat before summer is over." And there's certainly plenty good of pitches to hit for investors of all stripes.

Those wanting to boost the income-producing parts of their portfolios may want to consider these discounted Dividend Aristocrats. The best Dow dividend stocks are another great place to find reliable and rising payouts.

Other investors might be keen on long-term growth trends. If that's the case, green energy stocks look like a fountain of opportunity. Indeed, the renewable energy market is forecast to grow to almost $2 trillion by the end of the decade. These top-rated picks are well-positioned to take a piece of that pie.

Second-quarter earnings season kicks off this week with several large financial firms – including JPMorgan Chase (JPM, $114.67) – set to report. Other notable names on the earnings calendar include air carrier Delta Air Lines (DAL, $29.94) and insurance giant UnitedHealth Group (UNH, $524.45).

"For Q2 2022, the estimated earnings growth rate for the S&P 500 is 4.3%," says John Butters, senior earnings analyst for FactSet. "If 4.3% is the actual growth rate for the quarter, it will mark the lowest earnings growth rate reported by the index since Q4 2020 (4.0%)."

And this 4.3% estimate is down from the March 31 estimated earnings growth rate of 5.9%, with seven sectors expected to report lower second-quarter earnings than what was projected at the end of Q1. This is led by a 20.9% reduction in earnings expectations for consumer discretionary stocks, according to Butters. Energy stocks, on the other hand, saw a 42.2% increase in their earnings estimates.

"The energy sector will be watched closely throughout the reporting period," says Ross Bramwell, principal at investment advisory firm Homrich Berg. "As overall Q2 earnings estimates are in the mid-single-digits range, it is likely that without the energy sector overall earnings growth would be negative."

Bramwell adds that trends show negative earnings guidance is being issued by more S&P 500 companies for the second quarter and the full fiscal year compared to recent averages. "So it is quite possible that earnings estimates continue to move lower through the reporting period," he says.

JPMorgan Chase to Post Sharp Drop in Q2 Earnings

While quarterly results from energy firms will start to roll in later this month, this week's focus will be firmly on how financial firms fared in Q2.

"This year was supposed to benefit banks with economic recovery, but the Fed's rate rise regime to suppress inflation has hurt investor and borrower sentiment," says CFRA Research analyst Kenneth Leon.

The analyst doesn't expect big banks to post annual EPS growth, but believes some firms – including JPMorgan Chase, which will unveil its second-quarter results ahead of Thursday's open – will report an increase in revenue over the year-ago period.

Consensus estimates from Wall Street pros seem to agree with this outlook. Analysts, on average, expect JPM to report second-quarter earnings of $2.94 per share, down 22.2% on a year-over-year (YoY) basis. Revenue is projected to arrive at $32.0 billion (+6.7% YoY).

"Q2 2022 results are poised to benefit from rising rates, continued loan growth and modest credit losses," says Piper Sandler analyst Jeffery Harte, who has an Overweight (Buy) rating on JPM. But, "investors are more focused on a potentially looming recession." As such, he expects outlook commentary to "steal the show," with "credit (when and by how much could losses increase), the prospects for continued loan growth and the potential for investment banking activity levels to rebound" among the "primary areas of concern."

Delta Likely Saw Strong Demand in Q2

Delta Air Lines will unveil its second-quarter earnings report ahead of the July 13 open.

BofA Global Research analyst Andrew Didora (Buy) believes DAL's results will be at the lower end of guidance due to recent operational issues (which include rising fuel costs and pilot shortages).

But even with these issues, "U.S. airlines recently reported that their earnings recoveries have accelerated in Q2," says CFRA Research analyst Colin Scarola (Strong Buy).

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"In the month of May, U.S. jet fuel prices averaged $3.90 per gallon, which was up 123% YoY and up 107% from the average 2019 price of $1.88," Scarola adds. "Nonetheless, U.S. airlines have seen their earnings prospects improve as a post-pandemic demand surge drives revenue growth that is more than offsetting the rapid rise in expenses."

For DAL's second quarter, analysts, on average, are calling for earnings per share of $1.64 – compared to last year's per-share loss of $1.07 – and revenue of $13.3 billion (+87% YoY; +6.4% over Q2 2019).

UnitedHealth Group Expected to Show Solid Growth in Q2

UnitedHealth Group is one of a handful of Dow Jones stocks trading in positive territory in 2022, with shares up more than 4% for the year-to-date.

Not surprisingly, Wall Street pros are upbeat toward the insurance stock. Of the 26 analysts following UNH that are tracked by S&P Global Market Intelligence, 15 say it's a Strong Buy and six call it a Buy. This compares to four Holds and just one Sell.

"We recommend buying UNH based on the stock's bullish trend … and portfolio tailwinds from a relatively strong Managed Care sub-industry," says Oppenheimer analyst Ari Wald (Buy).

As for UnitedHealth's second-quarter earnings report – due out ahead of Friday's open – the pros, on average, are anticipating earnings of $5.20 per share (+10.6% YoY) and revenue of $79.7 billion (+14.7% YoY).

More pockmarks on the prospects for the U.S. economy sent America's major stock indexes into a near-360 during June's first trading session.

JPMorgan Chase (JPM, -1.8%) CEO Jamie Dimon unnerved some on Wall Street after telling a financial conference that he's preparing his own bank for more turbulent times to come. "You know, I said there's storm clouds, but I'm going to change it … it's a hurricane," he said, adding that investors should "brace yourself."

Economic data didn't help much to quell those fears. The Labor Department's Job Openings and Labor Turnover Survey (JOLTS) showed that job openings declined by 455,000 in April to 11.4 million, from 11.9 million in March. That sets up a possible cooling in the May jobs report due out Friday morning.

"We've enjoyed 12 consecutive months of payroll growth north of 400,000, but that streak is close to an end," says Greg McBride, chief financial analyst at Bankrate. "Job growth will continue, but at a more modest pace in the months ahead as the Federal Reserve works to slow the economy and corral inflation."

However, also Wednesday, the Institute for Supply Management's May manufacturing report showed that manufacturing activity remained robust, delivering a reading of 56.1 last month vs. 55.4 in April and 54.5 expected. (Anything over 50 implies expansion.)

Following on remarks from Federal Reserve Governor Christopher Waller suggesting the central bank might need to continue tightening monetary policy, James Bullard, president of the Federal Reserve Bank of St. Louis, told the Economic Club of Memphis that "I think we're on the precipice of losing control of inflation expectations."

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And San Francisco Fed President Mary Daly said the central bank should be aggressive with rate hikes until inflation is tamed. "We need to do that expeditiously, and I see a couple of 50-basis-point hikes immediately in the next couple of meetings to get there," she said.

That sent traders' views on the likelihood for another 50-basis-point hike in September to 60%, from 55% yesterday, according to the CME FedWatch Tool. Bonds sold off again as a result, sending the 10-year Treasury yield to as high as 2.95%.

Energy (+1.6%) was the only sector showing any real strength; U.S. crude oil futures improved by 0.5% to $115.26 per barrel as Shanghai began ending its two-month COVID-related lockdown.

The major indexes, meanwhile, started in the green, plunged deep into the red by noon, then spent the rest of the afternoon clawing away at most (but not all) of those losses. The Dow Jones Industrial Average declined 0.5% to 32,813, the S&P 500 was down 0.8% to 4,101, and the Nasdaq Composite shed 0.7% to 11,994.

Other news in the stock market today:

• The small-cap Russell 2000 declined 0.5% to 1,854.
• Gold futures improved by 0.3% to $1,843.30 per ounce.
• Bitcoin declined 4.9% to $30,104.76. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Salesforce.com (CRM) shares rocketed ahead by 9.9% after the company topped first-quarter estimates and raised its full-year outlook. Profits of 98 cents per share and revenues of $7.41 billion topped views for 94 cents and $7.38 billion, respectively. Meanwhile, CRM now expects $4.74 to $4.76 per share in full-year adjusted earnings, versus $4.62 to $4.64 per share previously. "Last night Salesforce delivered a much better than feared April quarter and guidance which will be a major relief for tech investors showing that core enterprise demand is holding up well despite the macro and geopolitical swirls," says Wedbush's Daniel Ives, who rates the stock at Outperform.

Take a Shot on Chinese Stocks?

If it's any consolation (probably not), the U.S. isn't the only place in the world experiencing deep year-to-date losses and nauseating volatility.

Take China, for instance. This country has long been considered one of the greatest growth plays in emerging markets. However, hyper-strict governmental regulatory crackdowns in the technology space, as well as a resurgent wave of COVID that sparked shutdowns in several large population centers, have cut the Morningstar China Index's value by roughly a third in 2022.

Yes, Chinese equities have enjoyed a small bump of late as governmental figures have given a token nod to the country's enormous technology sector. But strategists are skeptical that this will translate into any substantial changes in the country's stance long-term. Other hurdles remain, too.

"Domestic consumption remains weak, the housing market is sluggish, the online retail sector is saturated and Chinese stocks continue to face the risk of being delisted from foreign exchanges," says BCA Research.

And yet, equity researchers remain extremely bullish on a number of Chinese stocks. Much of that has to do with valuation – excessive stock losses have made many of these companies attractive, even in a perilous macro environment. Beware that some of it merely reflects the potential for a near-term rebound, not necessarily confidence in a favorable long-term setup. Still, nimble investors looking to generate excess returns in a tumultuous 2022 might find a few candidates among these five Chinese picks.

One trading session after the S&P 500 narrowly escaped bear-market territory, U.S. equity bulls went on the offensive in a day of robust and widespread gains.

A few single-stock headlines did some of the driving Monday. JPMorgan Chase (JPM, +6.2%), for instance, rocketed higher after CEO Jamie Dimon said "there's a very good chance" that his bank would hit a key performance target (17% return on tangible common equity) in 2022, and possibly exceed it in 2023. The announcement, a reversal of more dire guidance earlier this year, sent the sector, including Citigroup (C, +6.11%), Bank of America (BAC, +5.9%) and Wells Fargo (WFC, +5.2%), higher too.

Also Monday, shares of VMware (VMW, +24.8%) popped amid a Bloomberg report that semiconductor firm Broadcom (AVGO, -3.1%) was in talks to acquire the $40 billion virtualization and cloud computing firm.

While little information about a potential deal was available, Stifel analyst Brad Reback says "We believe it makes sense on many fronts as a Broadcom-controlled VMware will likely be much more profitable, less dependent on top-line growth and have less pressure to accelerate its ongoing shift to a (software-as-a-service) model."

The Dow Jones Industrial Average climbed 2.0% to 31,880, while the Nasdaq Composite was up 1.6% to 11,535. And all 11 of the S&P 500's sectors finished in the green, pushing the index 1.9% higher to 3,973 to give it some distance away from bear-market territory.

Some of the day's upward momentum might have been simply good old-fashioned dip-buying now that equity valuations have cooled off significantly from earlier-year levels. "Remember when stocks looked expensive on valuation?" say BofA Securities researchers. "The forward P/E ratio of the S&P 500 is now 16.5x, down from the high of 21.4x."

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But investors might want to stay cautious, given a number of previous head fakes from the market. Michael Reinking, senior market strategist at the New York Stock Exchange, said it would be important for the S&P 500 to, among other things, close above Friday’s high, which it did.

"One thing that I will highlight that is different about today's rally than the last few attempts is that while the strength is broad-based, the leadership is coming from financials, and not just the beaten-up long duration/tech stocks that have led to the downside."

Other news in the stock market today:

• The small-cap Russell 2000 was 1.1% better to 1,792.
• U.S. crude oil futures eked out a marginal gain to end at $110.29 per barrel.
• Gold futures rose 0.3% to settle at $1,847.80 an ounce, marking a third straight win.
• Bitcoin recovered to above the $30,000 level over the weekend, but shed all of those gains Monday afternoon, hitting $29,058.38, off 0.7% from Friday afternoon's prices. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Autodesk (ADSK) shed 4.1% after Deutsche Bank analyst Bhavin Shah downgraded the AutoCAD software developer to Hold from Buy. This comes ahead of ADSK's fiscal first-quarter earnings report, set to be released after Thursday's close, with Shah noting that recent conversations with platinum partners indicate mixed quarterly results. The analyst also points to the potential for downside revisions to fiscal-year estimates due to slowing adoption of multi-year contracts, as well as forex and Russia-related headwinds.
• Starbucks (SBUX) became the latest company to announce it is completely exiting operations in Russia, joining the likes of McDonald's (MCD) and Exxon Mobil (XOM). The coffee chain was one of many companies that pulled out of Russia when the country invaded Ukraine earlier this year. Starbucks has been in the Russian market for 15 years and has 130 locations throughout the country that account for less than 1% of its annual revenue. CFRA Research analyst Catherine Seifert maintained a Hold rating on SBUX in the wake of the news. "SBUX said it plans to pay associates in Russia their salaries for the next six months and provide assistance as they 'transition to new opportunities outside of Starbucks,'" the analyst says. "Weighing still-decent sales trends with an expected margin contraction in 2022, we view the shares as fairly valued versus peers, but worth holding."

Get the Best of Both Worlds. Get GARP.

Until the light at the end of the tunnel is identified as the sun, and not an oncoming train, investors would be wise to be especially discriminating when considering any new positions. Value stocks continue to be a popular choice among the analyst community, for instance, as Wall Street continues to severely punish gaudily priced stocks at the faintest whiff of trouble.

Wells Fargo Investment Institute strategist Chris Haverland and analyst Austin Pickle suggest looking at more than just price, however.

"We believe multiples may continue to decline in the near term as investors price in the increasing likelihood of a recession," they say. "In this environment, we favor focusing on reasonably priced, high-quality U.S. companies with consistent revenue and earnings growth."

Investors looking for this blend of value and growth are looking for "GARP": growth at a reasonable price. By focusing on both traits, investors can improve their chances of avoiding both stocks at high risk of a valuation-related tumble, as well as companies that are merely cheap because their prospects are lacking. Read on as we explore seven great GARP stocks that fall into this happy middle ground.

First-quarter earnings season starts to heat up this week. Among the notable names on the earnings calendar are electric carmaker Tesla (TSLA, $986.01), pharmaceutical giant Johnson & Johnson (JNJ, $180.05) and streaming name Netflix (NFLX, $343.38).

Results from JPMorgan Chase (JPM) last week underscored how macro factors are impacting publicly traded corporations. "The firm cited higher probabilities of downside risks driven by the war between Russia and Ukraine as well as elevated inflation," says Dan Eye, chief investment officer at asset manager Fort Pitt Capital Group.

"It feels like there is more uncertainty heading into this quarter's earnings season than there has been in some time," says Michael Reinking, senior market strategist at the New York Stock Exchange.

While Reinking expects first-quarter earnings to remain strong, guidance will likely fall on the conservative side.

"Investors will be looking to conference calls for a better understanding of how the environment is shaping up," Reinking adds. "The margin story will remain a focal point with the main questions centered around whether price increases have been tolerated, are they impacting demand and has that changed in the back half of the quarter as the consumer is now getting hit on multiple fronts."

Tesla Earnings to Show Strong YoY Growth

Oppenheimer analyst Colin Rusch (Outperform) thinks Tesla's ability to pass on higher supply-chain costs to consumers will help drive margins for the automaker. The company has "substantial pricing power," Rusch says, "as demonstrated on recent price increases across models and commentary that the company is sold out through the end of the year in certain geographies."

It's already been a busy news cycle for Tesla. In addition to headlines signaling a potential second TSLA stock split in just two years, CEO Elon Musk followed up reports that he took a sizable stake in Twitter (TWTR) with an offer to buy out the microblogging site.

But this week, attention will be back on Tesla's fundamentals, with the company scheduled to report its first-quarter results after Wednesday's close.

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Earlier this month, the company said it delivered more than 310,000 in the first three months of the year. "TSLA's growth stands in stark contrast to other automakers who posted steep declines in U.S. sales in Q1," says CFRA Research analyst Garrett Nelson. He adds that the startup of the company's new factories in German and Texas will accelerate deliveries going forward.

The analyst also believes that "supply agreements signed with mining companies position the company to navigate battery raw materials shortages more successfully than competitors." Nelson has a Buy rating on TSLA stock, saying the company's "first-mover and cost of capital advantages, as well as future demand from the rental car and commercial truck markets, remain underappreciated by investors."

For TSLA's first quarter, analysts, on average, are targeting earnings of $2.26 per share – a marked improvement over the 93 cents per share it reported in Q1 2021. On the top line, the consensus estimate is for $17.8 billion, up 71.2% year-over-year (YoY).

Johnson & Johnson Earnings Could Get Hit By Forex Headwinds

Inflation will certainly be in focus when Johnson & Johnson reports its first-quarter earnings report ahead of Tuesday's open.

In JNJ's fourth-quarter earnings call, Chief Financial Officer Joe Wolk acknowledged that the company was "experiencing the impact of inflationary pressures, including higher input costs across our business and more significantly with respect to consumer health." According to Wolk, this included the "availability and cost of certain commodities, labor and transportation."

To counter these cost pressures, the executive said JNJ was initiating price increases across its consumer health portfolio in 2022.

Meanwhile, "The 'macro' has engulfed the med tech narrative and added to the near-term uncertainty," writes Raymond James analyst Jayson Bedford. However, he still sees plenty of demand for the industry.

Bedford has an Outperform (Buy) rating on the Dow Jones stock. He believes the company's "growth profile" is supported by gains in both its pharmaceutical and medical technology segments, as well as the spinoff of its consumer health business.

But he recently lowered his first-quarter revenue and adjusted earnings per share (EPS) estimates (to $23.7 billion and $2.50 per share, respectively) due to forex-related headwinds. Consensus estimates are for Johnson & Johnson to report revenue of $23.7 billion (+7.7% YoY) and earnings of $2.61 per share (+0.8% YoY).

Netflix Price Hikes Could Offset Slowing Subscriber Growth

It's been a rough year for communication services stocks and Netflix is no exception. Shares are off around 43% so far in 2022 to erase all of their pandemic-related gains.

In addition to broad-market headwinds, Netflix has been hampered by slowing subscriber growth. In late January, NFLX stock plunged almost 22% the day after reporting lower year-over-year subscriber additions in the fourth quarter and guiding for even slower growth in the first quarter.

And this metric was likely pressured even more so after Netflix joined the growing list of companies pulling out of Russia by suspending service in the country.

Still, Netflix's "first-mover advantage and large subscriber base provides the company with a nearly insurmountable competitive advantage over its streaming peers," says Wedbush analyst Michael Pachter (Neutral). He adds that the firm's mid-January price hikes on U.S. plans will offset slowing user growth.

NFLX will unveil its first-quarter earnings report after April 19 close. Analysts, on average, are looking for earnings of $2.90 per share (-22.3% YoY) and revenue of $7.9 billion (+10.7% YoY).

First-quarter earnings season kicks off later this week. Among the notable names on the earnings calendar are big bank JPMorgan Chase (JPM, $132.46), air carrier Delta Air Lines (DAL, $36.79) and insurance giant UnitedHealth Group (UNH, $542.58).

The first three months of 2022 will be remembered as a period of extreme volatility for stocks. In addition to red-hot levels of inflation and supply-chain challenges carried over from 2021, Russia's attack on Ukraine sent markets into a tailspin – and catapulted commodities prices higher.

And to combat these higher prices, the Federal Reserve initiated its first rate-hiking cycle in more than three years.

Earnings take on more importance this time around "with valuation expansion potentially tough to come by due to rising interest rates and high inflation," says Jeff Buchbinder, equity strategist at independent broker-dealer LPL Financial.

Still, corporate America is in great shape, he adds, with 2022 earnings estimates now higher than they were at the start of the year.

"Despite margin pressures related to supply-chain disruptions and intense inflation pressures, we believe S&P 500 companies may deliver as much as 10% earnings per share (EPS) growth in the first quarter, compared to the current consensus estimate of about 5%," Buchbinder says.

JPMorgan Chase: Analysts Expect Underwhelming Q1 Earnings

Big banks typically mark the start of earnings season and several large financial stocks are set to report this week. Included among them is JPMorgan Chase, which will unveil its first-quarter results ahead of Wednesday's open.

"The U.S. economy is a key driver to consumer and commercial loan results, while geopolitical risks from Russia's invasion of Ukraine have hurt investment banking in Q1 2022," says CFRA Research analyst Kenneth Leon.

Leon adds that while the first quarter is typically one of the strongest for capital market and asset management businesses, that will not be the case this year.

He expects big banks will address the health of the U.S. economy and the implications of the Ukraine war in investor conference calls, but anticipates net interest income will likely post year-over-year (YoY) gains in the low single digits, while revenues and earnings for the industry will be negative relative to Q1 2021.

For JPM stock, specifically, consensus estimates are for earnings of $2.69 per share (-40.2% YoY) and revenue of $31.0 billion, up just 1.7% from the year-ago figure.

Looking ahead, though, Leon believes that "a continued rise in both the 10-year and 30-year U.S. Treasury rates may provide a lift to bank earnings in the second half of 2022."

He adds that large bank stocks are undervalued at current levels based on several metrics, including price-to-earnings (P/E) ratios. Indeed, JPM stock is currently trading at 11.8x analysts' 2022 earnings estimates, well below the S&P 500's P/E ratio of 25.7.

Delta Air Lines Should Benefit From "Rapid Recovery"

Delta Air Lines entered 2022 shaking off headwinds from the omicron variant of COVID-19, only to encounter spiking oil prices thanks to Russia's attack on Ukraine. The travel stock hit a 2022 bottom near $30 in early March, but has since recovered back to the $37 per-share mark after the airline said it will raise ticket prices in response to surging fuel costs.

Can a solid earnings report keep the wind at DAL stock's back?

While airline stocks are best for risk-tolerant investors, says Argus Research analyst John Staszak (Buy), "Delta's customers are among the most satisfied of any legacy carrier and have provided the company with sustained pricing power."

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The analyst adds that at a mid-March industry conference, Delta management "said that demand is stronger than it has ever been and that it has never seen such a rapid recovery."

Delta Air Lines will unveil its first-quarter results ahead of the April 13 open. Analysts, on average, are projecting a per-share loss of $1.32 – a significant improvement over the $3.55 per-share loss the airline incurred in Q1 2021. On the top line, the consensus estimate is for $8.8 billion, +124.7% YoY.

Outperforming UnitedHealth Expected to Post Solid Q1 Earnings

UnitedHealth Group has shown resilience during a rough start to 2022 for the broader market. Shares of the Dow Jones stock are up around 8% for the year-to-date, compared to a 5.9% loss for the S&P 500.

As for the insurer's first-quarter earnings report – due out ahead of the April 14 open – "expect another quarter of robust revenue and customer growth at OptumHealth driven by the ongoing move towards value-based care and further build out of the care delivery offering," says Truist Securities analyst David MacDonald (Buy).

The analyst adds that falling COVID-19 cases will likely have a positive impact on diversified managed care as a whole, while M&A activity will "not only augment core trends, but also drive further broadening of the service offering/enhanced positioning around value-based care."

As for UNH, MacDonald calls the company's $5.4 billion acquisition of home healthcare firm LHC Group (LHCG) – announced in late March – a "home run" that will be "highly complementary to Optum’s already broad suite of post-acute services."

Overall, analysts are targeting earnings of $5.37 per share (+1.1% YoY) and revenue of $78.8 billion, a 12.2% improvement over the previous year.

The environmental, social and governance (ESG) rating firm MSCI downgraded Russia’s ESG Government rating this week, from B to the lowest rating possible, CCC.

Many ESG fund managers rely on MSCI ratings for portfolio construction and for ETF indexes. Thus, many Russian companies could end up being cycled out of funds that rely on maintaining a minimum ESG ratings bar for inclusion.

The downgrade acts as yet another hit to Russian investments, many of which have been flattened since the country’s invasion of Ukraine. It's not the first one, either; MSCI ESG Research originally downgraded Russia at the end of February.

“Since the downgrade to B on Feb. 28, we have observed further heightening of Russia’s ‘Economic Environment’ and ‘Financial Governance’ risks based on the widening domestic impact of international sanctions and financial isolation on Russia’s economy,” the MSCI notice said.

Many firms have halted new investments in Russia. JPMorgan Chase, BlackRock and State Street have all announced that they are exiting Russia as able, and JPMorgan also removed Russian debt from its tracking indexes.

You can thank an increasingly untenable financial situation for both the country and its investments alike. Debt rating agencies S&P, Fitch and Moody’s lowered Russia’s credit rating to at or near junk status as of March 3, a full five days before MSCI made its latest downgrade.

ESG was at least part of the conversation. These debt rating agencies incorporate environmental, social and governance considerations when they are believed to be “material,” or important to a company’s financial performance.

Fitch, for example, cited its incorporation of country-level World Bank Governance Indicators for political risk and rights in its credit assessment. Moody’s considers a country’s inability to repay debt an ESG criterion, also pointing to Russia’s poor governance and corruption.

ESG Not Exactly Hot on Russia in the First Place

A Bloomberg analysis found that only about 300 of 4,800 ESG funds held Russian companies. Bloomberg noted that several ESG funds invested in Russia in search of green or responsible companies to meet intense demand from investors. These ESG investors might have waived human-rights concerns to further goals like renewable energy.

Other ESG investors, Bloomberg noted, steered clear of Russia.

Morningstar’s Jon Hale found that ESG funds held fewer Russian companies than conventional funds.

“Sustainable emerging-markets equity funds have, on average, just 1.8% exposure to Russian equities, nearly two-thirds less than the overall category average.” Hale notes that in most cases, Russian companies are ESG laggards and don’t meet fund criteria.

The question going forward is whether future ESG criteria will take a longer, harder look at investments in autocracies.

The major market benchmarks opened lower and losses accelerated amid reports that Russia is targeting civilian areas in Ukraine, including Kharkiv, the country's second-largest city. Additionally, after warning of "high-precision strikes," Russian forces on Tuesday hit a TV tower in Kyiv.

"The crisis in Ukraine is evolving rapidly, and with it so are investor expectations for international relations, commodity prices, inflations, the corporate operating environment and company margins," says Lauren Goodwin, economist and portfolio strategist at New York Life Investments.

"As the crisis unfolds, equities could bounce if developments point to contained conflict and lighter sanctions, while equities could deteriorate in moments of escalation."

Today, stocks crumbled as the attacks intensified, with financials (-3.7%) the worst-performing sector amid notable losses in blue chips American Express (AXP, -8.5%), Goldman Sachs (GS, -3.2%) and JPMorgan Chase (JPM, -3.8%).

Not surprisingly, the Dow Jones Industrial Average (-1.8% at 33,294) was the biggest decliner, followed by the S&P 500 Index (-1.6% at 4,306) and the Nasdaq Composite (-1.6% at 13,532).

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One bit of encouraging news today was this morning's Institute for Supply Management's (ISM) manufacturing purchasing manager's index (PMI), which rose to a higher-than-expected 58.6 in February.

"Manufacturing growth was solid in February, the inflation-sensitive prices component dipped on the month, and the index component reflecting supplier delivery performance noted better supply chain conditions than in January and December," says Bill Adams, chief economist for Comerica Bank.

"Falling coronavirus cases should help the domestic side of the economy improve further in the spring months, but spillover from higher energy and food prices and international shipping disruptions related to the Russia-Ukraine war are a downside risk to manufacturing near-term," he adds.

Other news in the stock market today:

• The small-cap Russell 2000 gave back 1.9% to end at 2,008.
• Gold futures spiked 2.3% to settle at $1,943.80 an ounce.
• Bitcoin rallied 5.5% to $44,252.28. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Target (TGT) jumped 9.8% after the big-box retailer reported adjusted earnings of $3.19 per share and revenue of $31 billion in its fourth quarter, beating analysts' estimates for earnings of $2.86 per share and sales of $31.4 billion. TGT also offered up higher-than-expected guidance for the upcoming fiscal year. "TGT continues to find ways to keep traffic and sales momentum strong, which is allowing the retailer to continue making investments in price, labor, etc. while also growing the bottom line," says CFRA Research analyst Arun Sundaram (Buy). "Fiscal 2023 results will be choppy quarter-over-quarter, but should generally get better as the year progresses."
• Foot Locker (FL) fell 7.6% after B. Riley analyst Susan Anderson downgraded the athletic apparel retailer to Neutral (Hold) from Buy and slashed her price target by $30 to $34 (FL closed today at $29.23). "We believe FL will be in a transition phase for at least a year as their exposure to Nike (NKE) is lowered, which creates limited visibility on future sales/margins," Anderson writes. "This transition could open up ~$900M in shelf space annually which we expect will benefit other footwear and apparel manufacturers including Crocs (CROX), New Balance and Adidas, but will create a void for FL until that space can be filled."

Why We're Still Watching Inflation

Oil prices, on the other hand, swung notably higher in today's trading, even after the International Energy Agency (IEA) agreed to release 60 million in emergency crude reserves.

U.S. crude futures were up more than 11% at their session peak before finishing up 8% at $103.41 per barrel – their highest settlement since July 2014. And these rising energy prices could keep the fire burning under already sizzling inflation.

"The Russia/Ukraine conflict is driving oil and other commodity prices higher, which does present the possibility of inflation remaining higher for longer," says Lindsey Bell, chief investment strategist for Ally Invest. "Medium-term inflation will be important to keep an eye on. Consumer confidence has already taken a hit and a survey by Ally shows that 77% of Americans believe inflation will increase over the next 12 months."

There are several options for investors looking to mitigate the effects of red-hot inflation on their portfolio, including seeking out high-quality stocks from sectors that are considered more "inflation-proof" than others: consumer staples, utilities and healthcare, for instance. You can also play the hot hand with energy stocks or increase exposure to rising commodity prices with these exchange-traded funds (ETFs). Each of the funds featured here provide investors access to a wide variety of commodities futures and hard assets that can often work as a hedge against inflation.

I’ve read countless articles from fellow financial advisers and investment gurus arguing for and against the traditional 60/40 (stock/bond) portfolio allocation. While many advisers have been trained to regard the 60/40 as a benchmark from the early days of their careers, a low interest rate environment means we need to get more creative.

We are living in a new world. The 60/40 was introduced nearly 70 years ago. Times have changed. In case there is any question about where I stand, put me down as firmly on the side of those who are ready to retire that strategy for good.

The new benchmark is 33/33/33; with your assets divided equally between stocks, bonds and alternatives.

Why is the 60/40 stock and bond portfolio outdated?

It has been covered broadly in the media that stock valuations have become untenable. Inflation is at its highest level in 30 years and rates are expected to gradually increase in the years ahead. Mix those ingredients together and you’d be hard-pressed to find an analyst predicting the kind of returns we’ve seen in the public markets over the past decade.

So, what’s the fix? This is where illiquid assets (alternative investments) — such as venture capital, real estate, private equity and private debt — need to enter the chat. Alternative asset classes provide the benefit of diversification (which is why many investors remain in fixed income) along with a low correlation to stocks. With everyone looking for an inflation hedge ... you are welcome.

Research in J.P. Morgan Asset Management’s “Guide to Alternatives” revealed that allocating just 30% to alternatives in your portfolio can substantially increase your annual returns, while simultaneously strengthening portfolio stability and decreasing risk.

Keep in mind that investment in these assets must be done in conjunction with cash-flow planning. As illiquid assets can’t be quickly sold, or liquidated, they may not be for everyone. But for high-net-worth and affluent investors who don’t need cash in the short-term and are willing take on some temporary illiquidity, alternative investments make sense. Private markets are simply more attractive than stocks. Beyond generating returns, these alternatives also provide greater opportunity for building generational wealth.

Practical examples

Let’s take real estate for example. Real estate can serve as a supplement to fixed income as a vehicle to improve yield for investors with a lower risk tolerance, while providing a hard asset that presents an opportunity for real income. At Manhattan West, we invest through a fund model and focus on mainly multi-family and industrial, but more broadly, there are several REITs that can be purchased to gain similar exposure to real estate.

And then there’s venture capital and private equity, which may be a better fit for an investor who is comfortable taking on more risk and isn’t looking for investment income right away. Allocating a small portion of a portfolio to an early-stage venture capital opportunity makes sense if time is on your side. It may provide a potential for more growth than stocks, especially as companies are staying private for longer and going public at higher valuations. We tend to invest in both early stage as well as late stage (pre-IPO) companies. It’s important that you invest through a financial adviser who has access to an experienced team connected to investment opportunities in both private equity and venture capital. Information about private investing companies is not typically available for public consumption. With the help of your financial adviser, you can determine, on a case-by-case basis, whether a private equity or venture capital investment is right for you.

An alternative investment strategy works best when personalized to the needs of the individual. There is no one-size-fits-all approach to investing, and that includes alternatives. Any financial adviser worth their salt will customize your portfolio with your risk tolerance and time horizon top of mind.

So why isn’t my financial adviser offering alternatives?

Scale. Financial advisers often choose to pile their clients into liquid model portfolios because it’s easier for them to scale without having to truly customize based on each individual client's needs. There is an alarming trend bubbling in the wealth management industry in which firms try to gather as many assets as possible – put the investment side on auto-pilot – so they can spend their time and attention on growth or a sale.

Whether these advisers have deprioritized efforts to include alternative assets in customized portfolios due to a traditional – and frankly outdated – approach to allocation, or out of selfishness, is beside the point. Your portfolio should be tailored to your aspirations and goals, and it may be time to start challenging your financial counsel, asking some tough questions.

Embrace 33/33/33 as the new benchmark. Because Modern Portfolio Theory doesn’t feel so modern anymore, does it?

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

More commotion in the bond markets sent equities off to a rocky start for the week – though what was shaping up to be a significant gashing turned out to be just a scrape.

The yield on the 10-year Treasury jumped yet again Monday, to as high as 1.808% after starting 2021 at 1.510%.

"While rates have been volatile throughout 2021, the 10-year has not reached this level since prior to the pandemic," says Lindsey Bell, chief money and markets strategist for Ally Invest. "Information received since the start of the new year is making the case for Mister Market that the Fed is going to raise rates and remove liquidity from the market at a faster pace than what was thought just over a week ago."

Remember: The Federal Reserve's members have signaled expectations for at least three hikes to the central bank's benchmark interest rate in 2022. Kiplinger forecasts the Fed will raise rates four times, and over the weekend, Goldman Sachs predicted the same. JPMorgan Chase (JPM) CEO Jamie Dimon upped the ante Monday, saying "I'd personally be surprised if it was just four."

However, heavy selling pressure Monday morning mercifully relaxed into the afternoon as 10-year rates backed off their highs.

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Fresh off its worst week in 11 months, the Nasdaq Composite dropped by as much as 2.7% at its nadir, to 14,530 – just about 80 points from official correction territory (a drop of 10% or more from a peak) – but managed to finish with a marginal gain to 14,942. The Dow Jones Industrial Average (-0.5% to 36,068) and S&P 500 (-0.1% to 4,670) closed down but well off their intraday lows.

Other news in the stock market today:

• The small-cap Russell 2000 slipped by 0.4% to 2,171.
• Gold futures posted a marginal gain, settling at $1,798.80 an ounce.
• U.S. crude oil futures slipped 0.9% to end at $78.23 per barrel.
• Bitcoin, which sat at $41,912.19 on Friday afternoon, dropped below $40,000 earlier in Monday's session but recovered to $41,714.45, a 0.5% decline. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Take-Two Interactive (TTWO) is upping its stake in the mobile video game world, announcing today that it is buying Farmville creator Zynga (ZNGA) for $12.7 billion in cash and stock. This works out to $9.68 per ZNGA share – a 61.3% premium to last Friday's close. "This strategic combination brings together our best-in-class console and PC franchises, with a market-leading, diversified mobile publishing platform that has a rich history of innovation and creativity," said Strauss Zelnick, CEO of Take-Two Interactive. "We believe that we will deliver significant value to both sets of stockholders, including $100 million of annual cost synergies within the first two years post-closing and at least $500 million of annual net bookings opportunities over time." The deal is expected to close by the end of the second quarter as long as it gets the green light from regulators and shareholders. ZNGA shares soared 40.7% on the news, while TTWO fell 13.1% – potentially creating an attractive entry point for investors looking to pick up one of the best communication services stocks for 2022 at a discount.
• Moderna (MRNA) was a rare splash of bright green today, jumping 9.3% after the biotech's CEO Stephane Bancel told CNBC's "Squawk Box" on Monday that the company is working on a COVID-19 booster that will target the omicron variant. Bancel said MRNA believes this will be the "best strategy for a potential booster for the fall of 2022" after discussions with various public health officials. This comes as the Centers for Disease Control and Prevention (CDC) said immunocompromised individuals are now eligible for a fourth vaccine dose, as detailed Monday in our free A Step Ahead newsletter.

Will Earnings Jolt the Market?

Interest rates might be dominating headlines now, but a new potential market mover kicks off later this week.

It's the unofficial start of the fourth-quarter earnings season – and while you can check out a schedule of major reports here, big names to watch include Delta Air Lines (DAL), Wells Fargo (WFC) and BlackRock (BLK), which we've previewed here.

According to FactSet, analysts' estimated earnings growth rate for S&P 500 companies in Q4 2021 is 21.7% – if achieved, that would be the fourth consecutive quarter that earnings growth has topped 20%, which should give investors something to look forward to.

"While there are real risks, expectations for continued hiring and spending will support growth in expected earnings," says Jeff Buchbinder, chief equity strategist for LPL Financial, who adds that despite the risks of continued volatility "higher rates have usually been associated with strong market performance" too.

Investors looking for ways to potentially buy on the dip during short-term volatility could consider Kiplinger picks for the year ahead – such as our top stocks for 2022 or our best exchange-traded funds (ETFs).

That said, if you have a greater thirst for risk, and a speculative portfolio allocation you can afford to lose, you might consider swinging for the fences – with the pros' help, anyway.

While Wall Street analysts typically don't make bombastic calls, they have identified a few stocks that they see, ahem, "going to the moon" over the next year or so. These 30 names in particular have consensus buy targets implying at least 100% returns – and in many cases, much more. But watch out: This is a volatile bunch.

If you or someone you know is looking into starting a business and needs financing, then our story could save them a great deal of money, frustration and disappointment.

“There are many pitfalls to avoid when securing funding for your first business, and understanding the risks is critical to success, your own peace of mind, and – something so often not considered – the impact on your family if the wrong type of financing is selected,” says Mike Rozman, CEO and co-founder of online lender BoeFly and a former VP at JP Morgan Chase Global Bank.

Online lenders connect start-ups with sources of financing which were, “One of the few blessings that came out of the Great Recession of 2008,” Rozman says. “We chose the name BoeFly to stand for ‘Business Opportunity Exchange’ and ‘Fly’ meaning speed. Online lenders are able to process loans with far less delay and hassle in most cases when compared with conventional lenders.”

Mistakes Startups Make When Looking for Financing

I asked Rozman to list what startups do wrong when looking for financing and how to remedy these shortcomings.

1. A failure to understand the lender’s criteria – who they generally lend to and why.

Consequences: You will spin your wheels without getting the right outcomes. Franchise business owners find that certain lenders will only lend if there are at least 250 locations in the system. If you are in a startup with only 20 units, and speak with the wrong lender, you will not secure financing, waste a lot of time and wind up frustrated.

2. Not being prepared to tell your story to the lender: “Here is How I Will Succeed.”

Consequences: You will not get the loan.

All lenders need to understand in clear terms how they will be paid back. This sounds simple, but in reality it is the applicant’s No. 1 job. If you cannot clearly show how that loan is going to be repaid – with realistic financial projections – do not even approach lenders.

Online companies work with business owners, helping them to create a lender-ready financing request. The red flag of a suspect financial services company is one where the intended borrower is not required to fully articulate their story and explain how the loan will be repaid. If you hear, “The specifics are not that important,” RUN!

Specificity is vital. Your business plan must explain the source of business income.

3. Assuming that it is going to be a sprint rather than a marathon.

Consequences: Frustration! This is a process, and the applicant must understand that it has different stages. It is not as simple as ordering a Uber or calling Door Dash and obtaining instant service. When individuals do not accept this fact, they become frustrated. Patience and a realistic timeline are absolutely necessary.

Therefore, having accurate and realistic expectations will reduce frustration and allow for more accurate planning. A business owner who needs money in 24 hours will be disappointed, or will wind up paying an extraordinary high rate.

4. Putting all your eggs in one basket – just applying to a single lender.

Consequences: You could wind up paying a far greater interest rate than necessary. Few business owners are aware of those lenders that offer competitive terms. It is important to connect with an array of lenders, which is exactly what the online lending platforms do – they shop for the best terms.

5. Failing to be sure you are dealing with a reputable lender.

Consequences: Radio and the internet advertise all sorts of business lenders that make borrowing seem easy and inexpensive. Before agreeing to work with any lender – especially those who advertise like mad – go to your Secretary of State’s website and look for complaints or actions against them. Read Better Business Bureau complaints and reviews.

If you are in the franchise area, visit the International Franchise Association’s website that lists providers. Also trade associations will have lists of approved lenders.

6. Failing to understand the risks of failure and how it could impact your life and family. Are you really able to do this? Don’t kid yourself!

Consequences: If you are still trying to figure out how to run a business – how to create a recurring revenue stream to meet your obligations – then do not get a loan! If you can’t prove that your business model works, do not get a loan!

It is critical to understand the risks of failure. In the case of an SBA loan, many require the borrower to pledge their home. In the event of failure, it can cost you and your family your home. This is no joke.

Rozman concluded our interview on a thoughtful and encouraging note:

“Ethical lenders want business owners to be successful and not take on obligations they cannot repay. Not everyone should be in business – but those who are passionate can often learn how. For first-timers, franchise investing in a proven business model often works extremely well and should be considered.”

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Stocks finished the week in mixed fashion as the Dow Jones Industrial Average was weighed down by financial stocks, but the tech-heavy Nasdaq Composite rebounded following yesterday's heavy selloff.

Big banks turned lower after the Federal Reserve declined to extend a pandemic-era exemption that allowed them to hold less loss-absorbing capital on their books. Because banks use money to make money, the market typically boos any increase in capital requirements, which lowers banks' revenue potential. JPMorgan Chase (JPM, -2.3%) and Goldman Sachs (GS, -1.0%) were among the Dow's top laggards as a result.

Tech stocks, meanwhile, returned to their winning ways after a Thursday spike in bond yields stoked inflation fears that sent traders scrambling out of the highest-flying names. Facebook (FB, +4.1%) popped on news that it is working on a version of its Instagram site suitable for children under the age of 13.

"Treasury yields pulled back slightly overnight following yesterday’s scary-looking spike, and that helped the bounce in the tech sector even as global risk assets remained under pressure in the wake of yesterday's dip on Wall Street," wrote Ken Berman, founder and CEO of GorillaTrades. "The fact that the Fed didn't extend an emergency rule that allowed banks to keep less reserves caused some turmoil among financials in early trading, but volatility remained relatively low in the other sectors."

At Friday's closing bell, the blue-chip Dow lost 0.7% to close at 32,628, while the Nasdaq gained 0.8% to 13,215. The broader S&P 500 split the difference, dipping 0.1% to finish at 3,913.

Other action in the stock market today:

• Visa (V) plunged 6.2% on a report that the Justice Department is opening an antitrust probe.
• FedEx (FDX) jumped 6.1% after beating analysts' earnings estimates.
• The small-cap benchmark Russell 2000 added 0.9% to 2,287.
• Gold futures managed a 0.5% improvement to $1,741.90 per ounce.

There's something to be said for sticking to what's working.

Despite a couple of days of underwhelming performance, the Dow is outpacing the Nasdaq by a wide margin so far this year.

Partly that's because investors in priced-to-perfection tech stocks have been quick to sell after years of big gains. And partly that's because the Dow contains some of the largest and most liquid ways to play promising contemporary trends.

After all, if you're investing in stocks set to benefit from the return of travel, leisure and hospitality, you're surely checking out Dow stock Walt Disney (DIS). If you're looking for stocks that offer exposure to a wider reopening of the economy, you'll recognize longtime Dow component Coca-Cola (KO) as a smart play. And there's no way you can add bets on big-time infrastructure spending to your portfolio without including Dow stalwart Caterpillar (CAT).

Indeed, whether you're looking to bet on a rotation into more value-oriented names or the potential outperformance of the most cyclical stocks, the Dow's 30 stocks contain multitudes. To get an idea of what the blue-chip average can do for you, have a look at how analysts' rate all 30 Dow stocks at this point in the economic cycle.

Over the course of the past year, a number of high-profile investment firms and banks have pronounced that the traditional 60/40 portfolio is dead. Though these statements inevitably caught headlines, from what we can tell, this notion has yet to have become real for many individual investors.

Here at Halbert Hargrove, we began talking about the death of the 60/40 portfolio several years ago. We published a market view for our clients and used the term “Death of 60/40” simply because we knew it would cause readers to dive in. But we don’t really believe the 60/40 portfolio is dead. To our way of thinking, hibernation is the best way to view what’s going on. Therefore, investors need to consider assets and/or strategies beyond just passive allocations to traditional stocks and bonds for the next few years.

Sobering returns for Treasuries

Before I go much further, let me steal some language defining the 60/40 portfolio from our 2017 mid-year market view. “60/40 is the conventional playbook for asset managers. It refers to the time-honored portfolio allocation of 60% equities/stocks and 40% fixed income/bonds.”

The COVID-19 pandemic caused central banks globally to lower interest rates to levels we had not seen since the financial crisis of 2008/2009. These interest rate cuts gave bond prices a tailwind, but bond investors should not expect a repeat performance in 2021. At this point they should not be banking on more significant interest rate declines to estimate their expected total future return. They should expect to earn the yield (interest) – and that’s about it.

So here’s the sobering reality, which is why the 60/40 rule is feeling pressure. Around the writing of this piece, we are sitting on U.S. Treasury rates as follows: The 2-year Treasury is yielding 0.13%, the 10-year about 1.10% and the 30-year is at 1.85% (Source: JP Morgan's Weekly Market Recap from Jan. 25, 2021). A common index used to represent the 40% of the portfolio under discussion is the Bloomberg Barclay US Aggregate Index. This index is yielding about 1.19%. Go a little bit further on the risk spectrum and the Barclays Investment Grade Credit Index is yielding around 1.91%.

When you compare investment grade bonds to the U.S. 10-year Treasury yield, you’re getting less than an additional 1% compensation for taking on more credit risk. So think of it this way if you expect the 60/40 to perform the way it has historically: If 40% of your portfolio is hibernating and only expected to earn about 1.9% on the top end for the next few years, the other 60% (stocks) are going to have to work much harder.

Investors still have many options

Saying the 60/40 is dead is fine, but we believe it will come back to life at some point. But whether it’s dead or just hibernating, it’s important to remember that investors have options outside of just moving more money to stocks. Yes, bonds still make sense, especially for risk control and for those who depend on regular distributions from their portfolios. Yes, returns are low, but not every investor can handle the stress of a 100% stock and high-risk portfolio. Many investors are likely to cause themselves more harm switching around positions in stressful times than having part of their portfolio earn 1.9%.

Our suggestion is to still hold some bonds in a balanced risk portfolio – but to hold significantly less than has historically been considered as part of a 60/40.

Before I get a bunch of arguments from active bond managers, the point of this piece is not to trash bonds as a legitimate asset class that still can play an important role. I get that one can make duration and credit bets and beat the benchmark bond indexes. But my point is that passively allocating to bonds right now is likely not going to get investors the returns they have been accustomed to for the past 35 years. Yes, we do believe you can add active credit to bond positions to improve returns.

Considering alternatives to traditional bonds is a prudent move

However, as diversified investors, we’re also looking to other areas beyond active bond management. None of these areas are bulletproof and all carry their own risks, which differ from traditional stocks and bonds. These investment possibilities include:

• Private real estate, which yields rental income.
• Reinsurance is another area where you earn insurance premium income.
• A third area is private direct debt, where one can demand higher rates of return for the risk taken.

There are also transparent low-cost equity strategies that can be employed to shift more of an allocation to stocks, but have protective buffers on the downside. These types of buffered equity strategies are not a free lunch. (Another term frequently used is defined outcome, but I prefer buffered equity. What used to be placed in structured notes can now be done in ETFs where you have stock exposures, but options contracts are then used to protect a certain level of downside.) If you’re protecting stocks beyond a certain level of loss, you should not expect that position to match the returns of stocks if all markets do is go higher in the interim.

Needless to say, we’re not expecting to enter a period similar to the years 1964 to 1981 anytime soon. In case you weren’t around for it back then: Interest rates increased over 10 percentage points, causing a 60/40 portfolio to underperform 3-month U.S. Treasury yields!

We’re also humble enough to recognize the perils of forecasting with confidence. If we stay range-bound with interest rates for the next few years, we do think it’s prudent for investors to consider alternatives to traditional bonds.

Sure, some investors can increase their equity allocations based on their financial situation and ability to add money when corrections occur. But for those who cannot (prudently) take on that risk, we think looking to other alternatives makes sense – while that traditional 60/40 portfolio allocation you used to rely on is hibernating.

The views contained herein are not to be taken as an advice or recommendation to buy or sell any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without previous notice. This material should not be relied upon by you in evaluating the merits of investing in any securities or products mentioned herein. In addition, the Investor should make an independent assessment of the legal, regulatory, tax, credit, and accounting and determine, together with their own professional advisers if any of the investments mentioned herein are suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

The Dow Jones Industrial Average crossed the 30,000 threshold for the first time Tuesday as investors seemed to cheer what they hope will be a less politically tumultuous next couple months.

The General Services Administration on Monday evening acknowledged Joe Biden’s presidential election victory, allowing the already-delayed presidential transition process to move forward. Biden spent Tuesday introducing new members of national security and foreign policy teams, though the biggest excitement on Wall Street came from Monday's reports that former Fed chair Janet Yellen could be America's next Treasury Secretary.

Financial stocks such as JPMorgan Chase (JPM, +4.6%) and American Express (AXP, +3.7%) raced out of the blocks, as did the Dow’s lone energy component, Chevron (CVX, +5.0%). But it wasn’t just the “rotation” at work today: Communication services plays such as Disney (DIS, +3.8%) and Comcast (CMCSA, +5.1%) fared well, as did much of the rest of the market.

The industrial average finished with a 1.5% gain to an all-time high 30,046, while the S&P 500 (+1.6% to 3,635) and Russell 2000 (+1.9% to 1,853) also rewrote the record books.

Other action in the stock market today:

• The Nasdaq Composite closed 1.3% higher to 12,036, just 20 points shy of its Sept. 2 high.
• Gold futures dropped yet again, to multi-month lows, off 1.8% to $1,804.60 per ounce.
• U.S. crude oil futures climbed 4.3% to settle at $44.91 per barrel.

Experts' Reactions to Dow 30,000

What’s in a number? At least for this one, not much more than a bit of hoopla. Here's what a few on Wall Street had to say Tuesday:

Ryan Detrick, chief market strategist for LPL Financial: “Although 30,000 isn't much different than 29,999, there is something special about those big milestone numbers."

James McDonald, CEO of alternative investment manager Hercules Investments: “At the end of the day, Dow 30,000 is just a number and the milestone doesn't hold any credence in determining the near-term stock market outlook.”

Scott Knapp, chief market strategist at CUNA Mutual Group: “The Dow passing 30,000 represents achievement of an arbitrarily-set milestone, but it also captures the sentiment of the moment for investors. Drivers include clarity about the election’s outcome to a small degree, and expectations for a highly accommodative environment for risk assets to a large degree.”

What's up next for the markets? Knapp says that while clarity on the presidential transition helps, "it’s not the big story. ... The far bigger influence is expectation for wide distribution of a vaccine that has the potential to quickly reduce economic headwinds caused by the COVID pandemic."

Indeed, it's likely a tug-of-war ahead. On one side, caution as COVID cases continue to mount – a possible second wind for telehealth stocks and other “coronavirus plays.” On the other, additional breakthroughs in vaccines and treatments may continue to fuel the market’s euphoria, which could benefit more speculative stocks. That could mean continued success for some of the most popular picks on the Robinhood app, where younger traders have enjoyed market-beating success buying deeply battered stocks.

It also could mean a warm reception for a number of initial public offerings (IPOs) that are expected to launch between now and early next year. Read on as we look at an updated list of highly anticipated IPOs, including DoorDash, Airbnb and others expected in the next few weeks.

Income investors who like the security provided by blue-chip stocks can look to the Dow Jones Industrial Average for ideas.

Indeed, among the 30 Dow stocks, only three – newcomer Salesforce.com (CRM), Disney (DIS) and Boeing (BA) – don't pay a dividend.

Massive market value, battleship balance sheets and income you can count on aren't just appealing to retail investors and retirees. Billionaires are big fans of those attributes, too.

To get a sense of how billionaire dividend investors view the bluest of blue chips, we sussed out Dow dividend stocks that fall among the big money's top stock picks. In every case, these stocks have the imprimatur of a billionaire, billionaire hedge fund or billionaire advisory practice. Most of these names saw a billionaire either initiate a stake recently or add to an extant position.

Have a look at the eight Dow stocks that billionaires love.

Stock prices and market values are as of Oct. 5. Holdings data is courtesy of S&P Global Market Intelligence, YCharts, WhaleWisdom.com and regulatory filings made with the Securities and Exchange Commission for the reporting period ended June 30, 2020. Stocks are ranked in reverse order of their weight in the selected billionaire's equity portfolio.

• Market value: $347.0 billion
• Dividend yield: 2.3%
• Billionaire investor: GQG Partners
• Percent of portfolio: 2.6%

GQG Partners (AUM $30.3 billion), a large advisory firm based in Ft. Lauderdale, Florida, likes to maintain a concentrated portfolio. Really concentrated. In fact, its top 10 holdings account for more than half of its equity assets.

The firm made a big bet on Procter & Gamble (PG, $139.39) during the second quarter of 2020, initiating a 4.9 million-share stake worth $588.9 million. The Dow stock now takes up 2.6% of the advisory firm's equity portfolio.

The pandemic has been helpful to consumer staples stocks such as PG. Shares are up almost 12% for the year-to-date, outpacing the S&P 500 by more than 6 percentage points. The reliable dividend, which currently yields 2.3%, is another positive attribute of this stock. We also like that the analyst community is bullish on P&G, with an average recommendation of Buy.

GQG isn't the only "smart money" fund interested in Procter & Gamble. PG boasts several other notable billionaire investors, including Trian Fund Management's Nelson Peltz.

• Market value: $301.8 billion
• Dividend yield: 3.6%
• Billionaire investor: James Hambro & Partners
• Percent of portfolio: 6.8%

JPMorgan Chase (JPM, $99.04), the nation's largest bank by assets, is naturally a hit with hedge funds. But one name in particular stands out: James Hambro & Partners ($3.8 billion in AUM).

Hambro, known as Jamie, is one of Britain's richest citizens. And he made the British tabloids a few years back when local authorities shot down his $2.5 million plan to connect two of his adjacent houses in London.

James Hambro & Partners holds 464,463 shares in JPM worth about $43.7 million for the most recent reporting period, after upping the position by about 11% in Q2. The stake accounts for 6.8% of the investment firm's portfolio.

The pros on average put JPMorgan among the Dow stocks they recommend you buy, but it's hardly unanimous. Seventeen analysts rate JPM at Buy or better, while eight say Hold. One analyst even has a rare Sell recommendation on the stock.

• Market value: $83.6 billion
• Dividend yield: 1.7%
• Billionaire investor: Warren Buffett (Berkshire Hathaway)
• Percent of portfolio: 7.1%

Berkshire Hathaway's (BRK.B) Warren Buffett was busy last quarter, trimming his stakes in numerous financial stocks, as well as credit-card processors Visa (V) and Mastercard (MA).

But he left untouched his position in American Express (AXP, $103.89), which continues to exemplify Buffett's saying that his preferred holding period is "forever."

Buffett initiated his stake in the credit card company in 1963, when a struggling AmEx badly needed capital. Berkshire obliged, getting favorable terms on its investment.

Berkshire owns 151.6 million shares in the Dow Jones Industrial Average component worth about $14.4 billion. That makes the holding company AXP's largest shareholder with 18.8% of its shares outstanding.

AmEx isn't exactly small potatoes to Warren Buffett, either. The Berkshire Hathaway portfolio is teeming with Dow stocks, but few carry as much weight as AXP at 7.1% of equity assets.

• Market value: $433.1 billion
• Dividend yield: 0.6%
• Billionaire investor: Marshfield Associates
• Percent of portfolio: 7.4%

Washington, D.C.-based advisory firm Marshfield Associates (AUM $3 billion) is one of several big-money funds that is building up its stake in Visa (V, $203.54). Marshfield upped its ownership to 737,782 shares by the end of the second quarter. The position, which is more than 7% of its portfolio, is worth about $142.5 million as of the most recent reporting period.

Visa's appeal is easy to understand. As the world's largest payments processor, Visa is uniquely positioned to take advantage of the explosive global growth in digital mobile payments and other cashless transactions. No wonder that its stock has more than rebounded from its COVID bear-market losses, with the stock up 8% year-to-date as investors look ahead toward the global recovery.

Marshfield isn't the biggest "big money" name in Visa, of course. Among the billionaires with a holding in Visa is Warren Buffett. While he did recently trim his position, as mentioned before, Berkshire still holds nearly 10 million shares in the Dow stock.

• Market value: $303.7 billion
• Dividend yield: 2.1%
• Billionaire investor: Ensemble Capital Management
• Percent of portfolio: 8.1%

Ensemble Capital Management (AUM $1.0 billion), an advisory in Burlingame, California, is one of several billionaires that have a sizable position in Home Depot (HD, $282.10).

Indeed, Ensemble raised its stake in HD by 156% in the most recent quarter to 249,102 shares worth $62.4 million. Home Depot now accounts for 8.1% of the equity portfolio, making it the second-largest position behind only Netflix (NFLX, 8.6%).

And why not? Ensemble's existing stake in Home Depot has served it well. HD shares have gained 29% year-to-date as the nation's largest home improvement retailer was allowed to stay open throughout the country's lockdowns, and benefited from people stuck at home sprucing up their abodes.

Analysts think it has farther to run. Home Depot sits among the upper half of Dow stocks, according to the analyst community. The pros have an average recommendation of Buy, according to S&P Global Market Intelligence, and they expect average annual earnings growth of 7.5% over the next three to five years.

• Market value: $1.59 trillion
• Dividend yield: 1.1%
• Billionaire investor: TCI Fund Management
• Percent of portfolio: 11.7%

Microsoft (MSFT, $210.38), the largest company in the world by market value, has plenty of billionaire investors. But one noteworthy top holder is TCI Fund Management, led by hedge-fund chief Chris Hohn.

The London-based fund has $25.2 billion in managed securities and a top 10 holdings concentration of 95%, and Hohn's personal net worth is estimated at $5 billion.

Microsoft is a natural stock pick for pretty much any institutional investor's portfolio. Its Windows operating system still is the most popular in the world, and the company has fully figured out how to drive recurring revenue by selling cloud-based services (including its Office productivity suite) to both enterprise and retail customers.

Almost 12% of the value of TCI's holdings stem from its 14.5 million MSFT shares. The fund's stake was worth $2.9 billion as of the second quarter. Indeed, TCI likes Microsoft so much it bought another 458,722 shares last quarter.

The pros love Microsoft, too. It's the top-ranked Dow stock at the moment, with 23 Strong Buys and eight Buys versus just four Holds, according to S&P Global Market Intelligence.

• Market value: $69.4 billion
• Dividend yield: 2.5%
• Billionaire investor: Greenhaven Associates
• Percent of portfolio: 11.7%

Goldman Sachs (GS, $201.80) was among the more notable stocks that Warren Buffett purged from Berkshire Hathaway's portfolio in Q2. The Wall Street investment bank stock still has plenty of fans, however.

One of them is Greenhaven Associates, which made GS its second-largest holding during the second quarter. The firm bought another 39,533 shares in the Dow stock to bring its position to 2,947,430 shares worth $582.5 million. That accounts for 12.9% of Greenhaven's holdings.

Greenhaven's other top stock picks include Morgan Stanley (MS), GM and homebuilder Lennar (LEN). And just for good measure, it also has a small stake in Berkshire Hathaway.

Interestingly, Greenhaven's Edgar Wachenheim is the author of Common Stocks and Common Sense, a well-received book describing the fund chief's investing philosophy.

• Market value: $1.99 trillion
• Dividend yield: 0.7%
• Billionaire investor: Warren Buffett (Berkshire Hathaway)
• Percent of portfolio: 44.2%

"I don't think of Apple as a stock," Warren Buffett says. "I think of it as our third business."

While Buffett might be silent about many of his equity holdings, he's never short of words for Apple (AAPL, $116.50), which at 44% of the Berkshire portfolio is the undisputed king of the Buffett stocks. Thanks to both its monumental run (heading into a late-August stock split), as well as lousy performances in several of Berkshire's other holdings, shares in the roughly $2 trillion company make up the largest position in Berkshire Hathaway's equity portfolio by a mile.

The Oracle of Omaha has only occasionally dabbled in technology stocks. But he bought Apple with two fists, and he's more than happy to discuss his ardor for AAPL. As he has said more than once on CNBC, he loves the power of Apple's brand and its ecosystem of products (such as the iPhone and iPad) and services (such as Apple Pay and iTunes).

"It's probably the best business I know in the world," Buffett said in February. "And that is a bigger commitment that we have in any business except insurance and the railroad."

With more than 245 million shares, Berkshire is Apple's third-largest shareholder after Vanguard and BlackRock – giants of the passively managed index fund universe. Buffett, with a net worth of roughly $81 billion, according to Forbes, owns 5.7% of Apple's shares outstanding.

A select group of bank stocks are in the midst of facilitating what might be the most ambitious lending program in U.S. history. It's part of the $2 trillion CARES Act, intended to help small businesses survive the impact of the coronavirus.

As part of this plan, the U.S. Congress has funded $350 billion of small business loans. And businesses ran through this money so fast that the Senate has passed another $484 billion relief bill, $310 billion of which will go toward the Paycheck Protection Program – a major part of the CARES Act.

These loans are 100% federally guaranteed and are made through a network of approved Small Business Administration (SBA) lenders. Small businesses may borrow up to $10 million under this program, with loan amounts capped at 2.5 times monthly payroll costs. Borrowers that continue to pay their workers through the end of June may have the full loan amount forgiven at the end of the two-month period.

Hundreds of billions of dollars in SBA loan volumes could generate billions of dollars of processing fees for lenders. According to Financial Times, lenders receive a 5% fee on loans below $350,000, 3% for loans below $2 million and 1% for loans exceeding $2 million. An added benefit is that these loans carry minimal risk since repayment is guaranteed by the U.S. government.

These SBA loans are welcome news for a number of bank stocks that have been weighed down by the other economic impacts of the country's coronavirus-related shutdowns. Here, we'll look at seven leading SBA lenders that could get at least a small lift from this massive government loan program.

Data is as of April 21. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

• Market value: $279.3 billion
• Dividend yield: 4.0%
• JPMorgan Chase (JPM, $89.05), with $3.1 trillion in assets, is the nation's largest consumer lender. The company also is largest among publicly traded U.S. bank stocks, the world's largest investment bank, No. 1 in the U.S. based on credit card volume and multifamily mortgage lending, and also a mutual fund manager. The bank serves nearly 63 million U.S. households, including 4 million small businesses.

JPMorgan grew core loans 2% last year to $958.8 billion, increased overall deposits 5% to $1.56 trillion and broadened its market share while maintaining strong expense discipline. Its 55% expense ratio compares favorably to peer levels (57% to 73%), and its 19% return on common tangible equity (ROTCE) was 4 percentage points higher than the next highest competitor, Bank of America (BAC).

This lending giant has delivered record revenues and net income nine times in the past 10 years and entered 2020 from a position of exceptional financial strength and liquidity, as evidenced by its Tier 1 capital ratio of 12.4%, which is well above the 9.0% regulatory minimum. (The Tier 1 capital ratio measures the bank's risk-adjusted assets versus equity and is a key measure of liquidity.) JPM has improved its payout for nine years in a row, and its payout ratio is a conservative 40% of profits ... though that number jumps to about 74% based on analysts' expectations for this year's coronavirus-hit profits.

JPMorgan Chase is already better prepared than most lenders to grow during a recession; internal stress tests indicate that JPM would be able to increase lending even if GDP drops by 35% this year. That hasn't stopped investors from selling JPM shares off by 35% since the bull-market high, of course. A lack of financial activity and extraordinarily low interest rates were among the various factors working against JPMorgan in Q1 as it posted just 78 cents per share in earnings – less than half of what analysts expected.

Nonetheless, Keefe, Bruyette and Woods analyst Brian Kleinhanzl thinks JPMorgan Chase will be a standout in the event of a recession. In fact, he even upgraded JPMorgan Chase to Outperform (equivalent of Buy) in early April.

SBA loans are a small component of JPMorgan's diversified business. But the bank was the seventh-largest SBA lender overall last year, and doling out these waves of loans should provide a small boost to its operations.

• Market value: $109.9 billion
• Dividend yield: 7.6%

With $2 trillion in assets, Wells Fargo (WFC, $26.84) ranks as the fourth largest U.S. bank. Wells Fargo provides banking, investment and mortgage products, as well as consumer and commercial finance services, through 7,400 branch offices nationwide.

Although Wells Fargo's EPS declined 5% last year as a result of litigation and remediation costs related to past sales practices, loans grew 1% to $962.3 billion, deposits increased 3% to $1.3 trillion and net charge-offs remained near historic lows at 0.29%, suggesting a high-quality portfolio. The company also hiked its dividend 13% in 2019, signaling its confidence in the future. It even repurchased 10% of its shares, marking its seventh consecutive year of big share buybacks.

Wells Fargo is focused on cutting expenses and has reduced its branch network by 12% over three years while simultaneously growing its online customer base 24%. Its number of checking account customers has risen nine quarters in a row. And the bank is well-capitalized, ending 2019 with a Tier 1 capital ratio of 11.1%

Nonetheless, WFC had a brutal first quarter that saw the company earn just 1 cent per share, versus analysts estimates of 33 cents. Like JPM and many other bank stocks, Wells Fargo's results suffered from a build-up of reserves as it prepares for loan defaults and nonpayments.

Still, Wells Fargo serves one of every three U.S. households and over 3 million small business customers. As a result, the bank is well-positioned for SBA loan growth. Wells Fargo ranked as the third most active SBA lender in 2019, closing 1,264 loans valued at $279.2 million.

• Market value: $8.0 billion
• Dividend yield: 7.7%
• Huntington Bancshares (HBAN, $7.80) is among the regional bank stocks that provide SBA loans. This Ohio-based bank operates across seven Midwestern states via 856 branches, and it boasts $109 billion of assets. Huntington's services include consumer and small business lending, wealth management, brokerage, trust and insurance services.

Huntington has improved its efficiency ratio five years in a row and consistently outperformed its peer group on expense control and profitability measures. The bank delivered a 56.6% efficiency ratio last year and an ROTCE of 16.9%. Its high Tier 1 capital ratio (11.3%) suggests above-average liquidity.

Loans are a 50/50 mix of consumer and commercial lending and improved by 2% last year to nearly $75 billion. Average deposits increased 1% to $79.2 billion. The bank's dividends have increased nine years in a row, and by more than 20% annually over the past five years.

A J.D. Power survey of small business customers last year gave Huntington top marks for customer satisfaction for the second year in a row. The bank also received top rankings for products and fees, convenience and channel activities. Relating to SBA loans: Huntington Bancshares was the fifth largest SBA lender overall last year, and the Midwest's top SBA lender.

Baird analyst David George recently recommended that investors add this high-quality bank to their portfolios. He likes HBAN's steadily rising expense discipline, declining risk and use of interest rate hedges to maintain better interest spreads than peers. Nonetheless, investors should brace themselves for a rough Q1 report, due out before Thursday's open. Analysts are looking for a sub-1% decline in revenues to $1.15 billion, but a nasty 53% drop in profits to 17 cents per share.

• Market value: $10.1 billion
• Dividend yield: 7.2%
• KeyCorp (KEY, $10.32), headquartered in Cleveland, is one of the nation's top financial services providers, with total assets of approximately $145 billion. Through its KeyBank subsidiary, it provides deposits, lending, cash management and investment services via a network of nearly 1,100 branches across 15 states.

Much of KeyCorp's recent growth is attributable to acquisitions, which have helped the bank diversify its loan portfolio, strengthen its core deposit franchise and improve efficiencies. Commercial mortgages comprise 90% of the commercial loan portfolio, and the bank has relatively few risky construction loans. Net charge-offs remained low at 0.42%, although the bank did take some fraud-related charges in the December quarter. Adjusting for these, net charge-offs were 0.35%, which is less than many other commercial banks.

KeyCorp's average loan portfolio grew nearly 5% last year to $93.6 billion and average deposits rose 4% to $112.6 billion, reflecting strength in the retail banking franchise and a record year for mortgage originations. The bank has increased dividends nine years in a row, and at a 24% annual pace over five years. The payout is plenty manageable under normal circumstances, though it could gobble up all of the company's profits this year if analysts' full-year earnings estimates are on the mark.

However, KeyCorp has a 20-year track record of SBA lending and was among the program's top 10 lenders last year, making it a clear beneficiary of the Senate's latest expansion to this lending program. The bank offers SBA loans across 18 states.

• Market value: $45.7 billion
• Dividend yield: 5.3%

In December, BB&T merged with SunTrust to become Truist Financial (TFC, $34.03), the sixth largest U.S. commercial bank by asset size and among a few so-called super-regional bank stocks. The merged entity boasts $506 billion in assets and ranks No. 2 for deposit market share in the top 20 U.S. metropolitan markets. The bank is headquartered in North Carolina and serves approximately 10 million households, primarily across the southeastern U.S.

The $319.2 billion loan portfolio includes $154 billion contributed by SunTrust and is relatively low risk, comprised mainly of $149.2 billion of commercial and industrial loans, $53.1 billion of residential mortgages and $27.6 billion of home equity loans. Excluding merger-related costs, the bank delivered a relatively attractive 53.4% efficiency ratio in the first quarter and 13.2% ROTCE – both numbers were considerably lower than year-end 2019 totals, however. Net charge-offs were 0.40% of average loans and leases last year.

Truist has identified $1.6 billion of annualized net expense savings to be realized over three years and targets an improvement in its efficiency ratio to a low 50% range and ROTCE in a low 20% range under normal circumstances.

Baird analyst David George upgraded his rating on TFC stock to Outperform in mid-March. He cites the bank's great Southeastern footprint and unique growth opportunities presented by its merger with SunTrust as reasons for a high rating. The company also received a slew of Buy ratings April 21 after the company beat first-quarter earnings expectations.

Truist was among the nation's top 20 SBA lenders last year, and should enjoy some lift from Washington's expansion of the SBA loans program.

• Market value: $49.8 billion
• Dividend yield: 5.1%
• U.S. Bancorp (USB, $32.73) is the nation's fifth largest commercial bank. This Minneapolis-based super-regional bank stock operates nearly 2,800 branches across 25 states offering services such as consumer and business banking, payment services, corporate and commercial banking, and wealth management. It principally serves the Midwest and West Coast.

U.S. Bancorp ended 2019 with loans up nearly 4% year-over-year to $294.9 billion and deposits increasing nearly 7% to $365.6 billion. Net charge-offs were a bit high at 0.52% of average loans, but the bank's adjusted efficiency ratio was solid at 55.4%. Adjusted ROTCE was also attractive at 18.1%. For the first quarter, net income did fall 28% year-over-year, but earnings per share of 72 cents easily surpassed analysts' expectations.

The bank recently formed an alliance with State Farm to take over its $11.2 billion of deposit accounts and $1.5 billion of credit card accounts. In addition, State Farm agents will cross-sell U.S. Bancorp products to their customers.

Last year, U.S. Bancorp was a top-10 SBA lender in both number of loans (fourth nationally) and dollar amount (eighth nationally). The bank's SBA lending increased 20% last year while overall SBA lending across the industry declined.

U.S. Bancorp has rewarded investors with 23%-plus annual dividend growth over the past 10 years. Baird analyst David George believes all banks have already been priced for a lengthy recession and thinks U.S. Bancorp will outperform peers due to its superior expense and risk management and higher fee exposure.

• Market value: $559.2 million
• Dividend yield: 0.9%

The nation's leading SBA lender is lesser-known Live Oak Bancshares (LOB, $13.86), a comparatively small North Carolina bank and the smallest player on this list of bank stocks.

Live Oak's main business is issuing loans guaranteed by the Small Business Administration, the USDA Rural Energy for America Program (REAP) and other government programs designed to help small businesses.

The bank has more than tripled its asset base since going public five years ago and grew the loan portfolio 43% last year by opting to retain a larger portion of its loans eligible for sale on its balance sheet. This action was taken to reduce earnings volatility and improve the predictability of earnings models. Live Oak ended 2019 with $3.6 billion of loans and $4.2 billion of deposits on its balance sheet.

The bank has no branch offices and originates all its loans online. This structure eliminates branch infrastructure costs that cost the typical bank 1% to 2% of funds every year. Live Oak's fintech investments have been substantial, however, which has contributed to a comparatively high 75.3% efficiency ratio.

One benefit of the bank's exclusive focus on SBA lending is high recurring fee revenues, which grew nearly 15% last year. These recurring revenues have enabled the bank to deliver three years in a row of nearly 20% annual dividend growth.

Live Oak Bancshares originated more than $619 million of SBA loans last year. And promising to shareholders: The stock has held up much better than many of the nation's more traditional banks, at a 24% loss through the bear market so far. The company will report Q1 numbers ahead of the April 23 opening bell.

Dividend investing is a favored strategy among many investing icons (Warren Buffett comes to mind) because income provides a cushion to your portfolio. When prices decline, a regular dividend can buoy your total return, helping to keep you from making panicked decisions. And if you reinvest those dividends, you can enjoy the benefits of compounding over time.

However, while dividend investing certainly can be a lucrative strategy, managing a portfolio of dividend-paying stocks isn't for everyone. If that's your situation, a simpler and more diversified approach is to invest in dividend mutual funds.

Mutual funds packed with income plays can provide a healthy yield without the need to select and monitor each individual company yourself, not to mention buying and selling more as their attractiveness ebbs and flows. And since dividend mutual funds typically hold hundreds of companies, you can easily create a diversified income-generating portfolio with just a handful of funds.

Here are five dividend mutual funds yielding 3% or more to diversify your dividend portfolio.

Data as of March 9. Yields represent the trailing 12-month yield, which is a standard measure for equity funds.

• Assets under management: $35.1 billion
• Dividend yield: 3.6%
• Expenses: 0.08%

Vanguard starts this list of dividend mutual funds with a basic dividend index strategy. The Vanguard High Dividend Yield Index Fund (VHYAX, $23.05) simply tracks the FTSE High Dividend Yield Index, which represents U.S.-listed companies (excluding real estate firms) with above-average dividend yields based on the FTSE All-World Index.

Thanks to a lack of active management, VHYAX is one of the cheapest dividend investing strategies on offer. With an expense ratio of just 0.08% – or just $8 on a $10,000 investment – and a current yield well north of 3%, this Vanguard mutual fund has found a potent combination of low cost and solid return.

Keeping an eye on risk is important here, as simply chasing high yield can lead to investing in companies with poor fundamentals. However, Morningstar analyst Venkata Sai Uppaluri notes that "although it doesn’t screen for quality and may own some firms with weak fundamentals, it has limited exposure to firm-specific risk." That risk is further diminished thanks to a broad portfolio of nearly 400 large-cap companies. Also, VHYAX's market cap-weighted approach, where companies are weighted according to their relative market size, "helps mitigate turnover," where trading costs can weigh on performance. Top holdings include dividend-paying blue chips such as JPMorgan Chase (JPM), Johnson & Johnson (JNJ) and Procter & Gamble (PG).

Since VHYAX targets big names that are slower-growing but higher-yielding, it might lag behind more growth-oriented funds in bull markets. But the strategy holds up well during flat periods and downturns. This mutual fund only began trading in 2019, but its exchange-traded version improved by more than 10% on a total-return basis (price plus dividends) in 2011, while the S&P 500 delivered a 2% total return on flat price performance.

Learn more about VHYAX at the Vanguard provider site.

• Assets under management: $12.0 billion
• SEC yield: 3.6%*
• Expenses: 0.69%

The Fidelity Capital & Income Fund (FAGIX, $9.17) technically is a bond fund, but it also pays out dividend income thanks to a roughly 20% slug of equities.

FAGIX also is a lesson in risk and reward. While the fund has outperformed many of its peers in the U.S. high-yield bond fund category, it's done so by taking considerably more risk.

Fidelity Capital & Income doesn't shy away from low-quality debt, even defaulted securities and companies with unfavorable balance sheets. The higher volatility of lower-quality bonds has earned it a 10-year standard deviation of 7.40, well above the category average of 5.84. (Standard deviation measures how much a fund fluctuates up and down. The higher the number, the bumpier the ride.) To see this rollercoaster in annual returns, consider that the fund fell 32% in 2008 then shot up 72% in 2009.

While FAGIX is aggressive, Morningstar Senior Analyst Eric Jacobson notes that the fund's manager, Mark Notkin, has proven adept at picking companies and gauging when to shift from overvalued debt to distressed equities. Its stock portfolio right now is led by Air Canada (ACDVF), Mastercard (MA) and Brazilian meat processor JBS SA (JBSAY).

As long as you're comfortable with risk and have a long enough time horizon to ride out any drops, FAGIX can be a lucrative income fund. Better still: It's actually a monthly dividend payer.

* SEC yields reflect the interest earned after deducting fund expenses for the most recent 30-day period and are a standard measure for bond and preferred-stock funds.

Learn more about FAGIX at the Fidelity provider site.

• Assets under management: $7.1 billion
• Dividend yield: 4.8%
• Expenses: 1.21%

The Lazard Global Listed Infrastructure Portfolio Open (GLFOX, $13.81) fund uses the stability of infrastructure companies, such as utility stocks and toll road operators, to generate a steady yield.

"These industries are regulated and the companies typically have assets that operate in a monopolistic environment," Morningstar Senior Analyst Patricia Oey says. "As such, they tend to have stable pricing, stable demand, and therefore stable earnings to support healthy dividends."

GLFOX uses what it calls a "Preferred Infrastructure" strategy that focuses on companies that own physical infrastructure assets and meet certain "preferred" criteria, such as profitability, longevity and revenue certainty. These companies are then ranked based on their valuation discount with the cheapest companies forming the cornerstone of the portfolio, Oey says.

Being a "global" fund, nearly three-quarters of the portfolio is invested internationally, with the biggest chunk of that coming from Europe. Another 20% of assets are invested in U.S. stocks, and the rest is stored in cash. GLFOX's concentration in Western Europe, utilities and toll roads can present a risk, Oey says, but she feels the manager's disciplined, quality-focused and value-based approach should mitigate this.

It has a modestly sized portfolio where mutual funds are concerned, with just more than 30 holdings currently, although it has been known to hold up to 50 names. Top holdings include the likes of National Grid (NGG) and Norfolk Southern (NSC).

Over the past month, Lazard Global Listed Infrastructure Portfolio Open has held up a little better than both its peers and the broader market. Meanwhile, its declines have widened the yield to nearly 5%, which is extremely high among dividend mutual funds.

Learn more about GLFOX at the Lazard provider site.

• Assets under management: $66.6 billion
• Dividend yield: 3.6%
• Expenses: 0.12%

The Vanguard Real Estate Index Admiral (VGSLX, $117.66) is another Vanguard fund with an impressive yield, with this one focused on real estate investment trusts (REITs). These typically dividend-friendly companies own and sometimes operate real estate ranging from office buildings to malls to hotels and much more. They're exempted from paying federal income tax, but in return, they must dole out at least 90% of their taxable income back to investors in the form of dividends.

Because REITs tend to march to a different drummer than stocks and bonds, real estate-focused dividend mutual funds like VGSLX can provide some diversification to a stock-and-bond portfolio.

Vanguard Real Estate Index Admiral, at more than $66 billion in assets and just 0.12% in annual expenses, is among the largest and cheapest of real estate funds. Its low fees have helped it outpace more than three-quarters of its peers in the past 15 years, including actively managed REIT funds.

Morningstar Director Ben Johnson says VGSLX's close tracking of its index, low turnover and diversification across property sectors have earned it an above-average process rating on the Morningstar scale. Moreover, "Within our new ratings framework, which puts even greater emphasis on fees, the fund's Institutional, Admiral, and exchange-traded fund share classes have earned an upgrade to a Morningstar Analyst Rating of Gold from Silver."

VGSLX currently boasts 185 holdings, including the likes of telecommunications infrastructure REIT American Tower (AMT), logistics-and-supply-chain real estate owner Prologis (PLD) and data center REIT Equinix (EQIX).

Learn more about VGSLX at the Vanguard provider site.

• Assets under management: $102.6 billion
• Dividend yield: 3.5%
• Expenses: 0.63%

As the name suggests, American Funds The Income Fund of America F1 (IFAFX, $20.60) aims for income first, capital appreciation second. Its trailing 12-month yield has consistently been in the top 20% of all "allocation" category (part-bond, part-fund) funds since 2009.

To provide current income, the fund managers invest primarily in dividend stocks (at least 60% of the portfolio) and interest-paying bonds. "On the equity side, a stock must yield at least 3% in order to be considered for purchase, and managers can add to names that yield 2.7% or higher," writes Morningstar Senior Analyst Greg Carlson. He points out that this has led to a value bias, which has weighed on the fund's overall return in recent years.

Rather than chasing financially troubled companies to meet their yield target, IFAFX's fund managers have gone overseas, where yields might be higher without sacrificing on quality. Around one-quarter of the fund's holdings are based outside the U.S., with the U.K. making up the majority at more than 8%. Top holdings right now are dominated by American firms, including Microsoft (MSFT), JPMorgan Chase and CME Group (CME).

On the bond side, which makes up just under 25% of fund assets currently, IFAFX has been known to lean on lower-quality corporate bonds and agency-backed securities, though the managers have toned down the risk since the financial crisis. Currently, more than half the bond portfolio is in Treasuries or AAA-rated debt (the highest possible rating), though roughly a quarter is in junk bonds.

Kiplinger favors mutual funds you can buy for no transaction fee. While the most basic shares (the A-class AMECX listing) has a maximum 5.75% sales load, investors who use a handful of online brokers, including Fidelity and Schwab, can purchase IFAFX, which is a no-load F1 share class.

Learn more about IFAFX at the American Funds provider site.

The S&P 500's dividend stocks provided shareholders with an average payout boost of more than 8% in 2019. However, a number of outstanding companies announced far more substantial dividend increases – 20%, 30% or more. In a few cases, companies more than doubled their payouts overnight.

Companies often authorize significant upgrades in their regular dividends to attract new investors or stand out from industry competitors. While one-time influxes of cash will often go toward buybacks or one-time special dividends, firms that believe they can maintain heightened levels of profitability will return some of that money through larger regular payouts.

You'll notice that many of the past year's largest dividend increases came from the banking industry. That's in part because some large banks that were sitting on stockpiles of cash received permission from government regulators to distribute their excess capital to investors. Another major impetus for dividend growth was tax reform, which bumped up after-tax profits for many American companies, including banks.

Here, we look at 30 companies that stood out over the past year because of their outsize dividend increases. Each dividend growth stock listed here improved its regular payout by at least 20% in 2019, though in numerous cases, the dividend improved by considerably more. Let's take a look.

Data is as of Jan. 20. Stocks listed by one-year dividend growth. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

• Market value: $306.7 billion
• Dividend yield: 2.1%
• 2019 dividend increase: 20%
• Bank of America (BAC, $34.71) is America's second largest money-center bank by market capitalization, behind only $426 billion JPMorgan Chase (JPM). BofA is tops, however, in market share of consumer deposits, and it also claims to be the country's leading digital bank.

Thanks to ready access to low-cost funding, Bank of America has been able to boost its earnings assets by double digits over the past few years while using less regulatory capital.

The bank finished 2019 with a decent fourth quarter in which net income grew about 6% to 70 cents per share. It closed out the year with assets totaling $2.43 trillion and deposits of $1.43 trillion.

Bank of America's most recent dividend hike was announced in July" a 20% improvement to a new quarterly rate of 18 cents per share. The cash distribution has exploded over the past five years by 260%, but it sprang from a lowly position. BofA's dividend shrank from 64 cents in 2008 to a penny in 2009, and the company only restarted its dividend growth in 2014, when it jumped to 5 cents per share.

A meager payout ratio of 24% (that is, 24% of BofA's profits go toward paying the dividend) leaves a wide margin of safety and plenty of room for future dividend growth.

• Market value: $1.1 billion
• Dividend yield: 1.9%
• 2019 dividend increase: 20%
• First Bancorp (FBNC, $38.39) is the fourth largest bank headquartered in North Carolina. Founded in 1935, this community bank has $6.1 billion in assets and approximately 100 branch locations across both Carolinas.

The bank plans to expand its footprint in North Carolina's most populous markets, which include Asheville, Winston-Salem, Greensboro, Raleigh and Charlotte, while upgrading its technology. Last year, First Bancorp launched new bill pay systems, mortgage-driven loan apps and call centers. In 2020, the bank plans to introduce new credit card lending and retail banking platforms.

Reflecting the strength of its Carolina metro markets, First Bancorp has generated roughly 34% annual earnings growth over the past half-decade, and it has consistently beaten analyst consensus EPS estimates every quarter since 2015.

First Bancorp announced two dividend hikes in 2019 – though only one, a 20% increase to 12 cents per share, took effect last year. The second announcement, made at the end of December, was a much more significant enhancement to 18 cents per share, or a 50% hike. That surely will rank among 2020's largest dividend increases. Like BofA, a meager payout ratio (23%) gives the company ample room to keep hiking its payouts.

• Market value: $11.4 billion
• Dividend yield: 1.5%
• 2019 dividend increase: 20%

Military shipbuilder Huntington Ingalls Industries (HII, $277.81) was one of 16 companies awarded huge contracts by the Defense Intelligence Agency in September for analytical and operational support services. The multiyear contract has a five-year base period and a potential value of $17 billion.

That news sparked short-term optimism in the stock and was one of several drivers of the company's 32% market-beating gains last year.

Huntington Ingalls delivered more good news when it reported its September quarter, including 7% revenue growth due to acquisitions and higher production volume at its Newport News ship-building yard. Contract backlog at the end of September was $39.2 billion, up 70% from year-end 2018. HII also generated $250 million of free cash flow, $103 million of which was distributed to shareholders via dividends and share repurchases. Earnings per share declined by 29% due mainly to accounting adjustments and higher pension costs, but its profits still were higher than consensus analyst estimates.

A couple days prior to reporting these results, Huntington Ingalls announced a 20% bump in its payout to $1.03 per share. It also announced a $1 billion increase to its share repurchase program, and extended the timeline of that plan from Oct. 31, 2022, to Oct. 31, 2024.

The company's payout ratio is a prudent 24%, and it has been a generous dividend growth stock, averaging 39% raises annually over the past half-decade.

• Market value: $5.9 billion
• Dividend yield: 3.0%
• 2019 dividend increase: 20%
• Synovus Financial (SNV, $40.00) became the Southeast's fifth largest bank last year by acquiring Florida Community Bank. Today, the bank has $48 billion of assets and a network of roughly 300 branches across Georgia, Alabama, South Carolina, Tennessee and Florida.

The merger expanded Synovus' presence in fast-growing areas of Florida that now represent one-third of its franchise. In addition, the company broadened its wealth management and brokerage capabilities, gained new cross-selling opportunities and leveraged its technology investment across a broader footprint.

Synovus has produced 22% annual EPS growth over the past five years and regularly outperforms regional peers on profit metrics such as net interest margin (NIM), return on assets (ROA) and return on equity (ROE).

Its robust financial growth has been redistributed to shareholders in the form of a quarterly dividend that has expanded by well more than 24% annually. That includes a 20% hike announced in mid-January 2019. A payout ratio of 34% implies a safe dividend with flexibility to grow.

• Market value: $282.8 billion
• Dividend yield: 1.5%
• 2019 dividend increase: 20%
• UnitedHealth Group (UNH, $298.47) is the American market leader in managed health-care plans and benefits. The company provides health-care coverage and related services to more than 137 million individuals and is one of the nation's largest providers of Medicare Advantage plans. Through its OptumHealth business, the company also offers technology-enabled health services, including prescription drug services.

UnitedHealth has been a marvel of predictability, delivering 11% sales growth and roughly 14% EPS growth annually over the past decade. That included a 7% improvement on the top line and a 17% boost to the bottom line in 2019. The result: $18.5 billion in cash flows from operations across the year. And thanks to strong recurring revenues, UNH has high earnings visibility. It's guiding for high-single-digit sales and profit growth in 2020.

UnitedHealth has raised its dividend by 20% for three consecutive years, and the payout has been on the rise annually since 2010.

• Market value: $454.9 billion
• Dividend yield: 0.6%
• 2019 dividend increase: 20%
• Visa (V, $204.70) is the world leader in digital payments. During its fiscal year ended Sept. 30, 2019, the company processed 138.3 billion payments for 15,500 financial institution clients. Visa's total payments and cash volume grew to $11.6 trillion, and more than 3.4 billion Visa cards were available for use worldwide and accepted at more than 61 million merchant locations.

The company see growth opportunities in its core credit, debit and pre-paid card products as a result of $17 trillion in consumer spending and $15 billion to $20 billion of business-to-business (B2B) spending still done in cash and checks. Visa also plans to accelerate its migration into digital payments with new products for B2B, person-to-person (P2P), business-to-consumer (B2C) and government-to-consumer (G2C) payments.

Visa's revenues improved by 11% in fiscal 2019, fueling a 20% rise in EPS. That came as a result of new client partnerships, organic investments and acquisitions. Recent M&A activity included a cross-border payment processor (Earthport) and a point-of-sale payment software developer (Payworks). Visa is guiding for low double-digit 2020 revenue growth and mid-teens EPS growth.

Visa is gaining a reputation among dividend growth stocks. Its 20% dividend hike in 2019 was right in line with its five-year average and marked the company's 11th consecutive improvement. A modest payout ratio of 19% should enable the company to keep the pedal down.

• Market value: $885.8 million
• Dividend yield: 3.4%
• 2019 dividend increase: 21%
• Federal Agricultural Mortgage Corp. (AGM, $82.70), also known as "Farmer Mac," lends to farmers and ranchers across rural America. The company offers loans secured by first liens on agricultural real estate, agricultural and rural development loans secured by the U.S. Department of Agriculture, as well as loans that help cooperatives finance rural telecom and electric systems. Over the past decade, Farmer Mac's loan volume has grown by nearly 11% annually.

Despite robust loan growth, Farmer Mac holds only a 6% share of the expanding $245 billion agricultural credit market. Significant market growth is expected as a result of rising worldwide food demand; to feed the world's growing population, American farm productivity must double over the next 30 years. Farmer Mac plans to leverage its lower cost of funds – a major competitive advantage – to gain market share.

Farmer Mac's profit growth has been much more modest than the previous companies on this list, at about 7.5% annually. Still, it has been able to afford robust dividend increases of about 38% annually over the past half-decade; last year's hike came to 21%. Despite that, AGM shares boast a modest payout ratio of just 34% of the company's profits.

• Market value: $66.4 billion
• Dividend yield: 3.0%
• 2019 dividend increase: 21%
• PNC Financial Services (PNC, $153.36) provides retail banking services to more than 8 million retail customers across the Mid-Atlantic, Midwest and Southeast. Its digital footprint is built around its well-known "Virtual Wallet" product. The company also offers corporate banking to clients that include two-thirds of the Fortune 500 companies, and its asset management business oversees just less than $300 billion in assets.

PNC also owns a minority stake in BlackRock (BLK), one of the world's largest investment management firms.

2019 was a relatively slow year for the company, however. Revenues improved by just 4%, while net income ticked just 1.3% higher. The company's fourth-quarter earnings managed to top estimates, though Wall Street knocked shares lower on worries about increasing costs. Still, PNC has delivered 3.5% annual growth in assets, 5% yearly EPS growth and nearly 6% gains in book value per share.

But the company is sharing increasing amounts of its wealth to shareholders. PNC announced a $1 billion increase to its share-buyback plan, through the end of Q2 2020. It also announced a 21% dividend hike in July to $1.15 per share – a little higher than its 19% five-year annual average.

• Market value: $128.6 billion
• Dividend yield: 2.1%
• 2019 dividend increase: 21%
• Union Pacific (UNP, $185.32) operates the Union Pacific Railroad – a rail network connecting 23 states in the western U.S. Its rail system serves many of the fastest-growing American population centers, as well as all of the major West Coast and Gulf Coast ports and eastern gateways. It also connects with Canada's rail systems, and it's the only railroad serving all six major Mexico gateways.

Moreover, UNP provides rail freight services for more than 10,000 customers primarily involved in the agricultural, energy and manufacturing industries.

The trade war with China negatively impacted the company's September quarter results, leading to a 7% year-over-year decline in freight volume. That said, EPS still improved by 3% thanks to operating efficiencies and $1.1 billion worth of share repurchases during the quarter. Union Pacific did guide for a 10% volume decline in the December quarter, however, which caused analysts to reduce consensus 2019 EPS estimates. (The company's Q4 results are due out Jan. 23.)

Recent trade war issues have interrupted an otherwise excellent past performance which had Union Pacific generating 14% yearly EPS gains over the past decade.

The company has also been a consistent dividend growth stock; its payouts have improved for 13 years in a row, including at 14% annual clip over the past five years. UNP offered up a pair of hikes in 2019 – first from 80 cents per share to 88 cents in March, then again to 97 cents in September, which was good for a total jump of about 21%.

• Market value: $9.3 billion
• Dividend yield: 1.2%
• 2019 dividend increase: 25%
• Carlisle Companies (CSL, $163.95) owns a portfolio of niche brands and businesses that manufacture highly engineered products for the roofing, aerospace, medical, defense, transportation, industrial, agriculture, mining and construction industries.

The company delivered a stellar September quarter performance, with sales up 8% year-over-year, its 26th consecutive quarter of sales growth. EPS from continuous operations rocketed 52%. Carlisle benefited from price increases, cost savings and acquisitions in its construction materials business, and a favorable sales mix in its interconnect technologies segment.

This reliable performer has delivered 9% annual sales growth and 10% yearly EPS gains over the past five years. Carlisle is a spectacular dividend growth stock, too, boasting 42 consecutive annual increases. Last August, it bolstered its payout by 25%, to 50 cents per share.

• Market value: $301.7 million
• Dividend yield: 3.9%
• 2019 dividend increase: 25%
• First Choice Bancorp (FCBP, $25.88) is a Southern California community bank with nine branches and two loan production offices serving Los Angeles, Orange and San Diego Counties. The bank was founded in 2005 and has $1.7 billion in assets. It evolved from being primarily a lender to the Asian-American community to become a more mainstream bank.

Since 2014, First Choice has generated 22% yearly loan growth and 21% deposit growth. Assets exploded by 60% in 2018, when it acquired rival Pacific Commerce Bancorp. The merger also enabled FCBP to improve efficiencies via increased scale. Its profits per share have swelled by 28% annually over the past three years, including a 17% improvement during the September quarter.

First choice's near-term priorities are deepening its presence in Southern California markets and returning cash to shareholders through dividends and share repurchases. It worked toward that latter goal in November, announcing a 25% dividend increase to 25 cents per share – its first payout hike in four years.

• Market value: $650.1 million
• Dividend yield: 1.1%
• 2019 dividend increase: 25%
• MGP Ingredients (MGPI, $38.18) is a major supplier of distilled spirits to branded liquor producers, and also produces specialty wheat proteins and starches. Although not a name familiar to many consumers, MGP is a leading supplier of premium bourbon, rye whiskies, distilled gin and vodkas.

The company has turned around from a $4.9 million loss in 2013 to a $37.3 million profit in 2019 thanks to MGP's focus on premium liquors, whiskey's rising share of the spirits market, and margin gains from a better product mix. The company's sales of premium alcoholic beverages have grown from 57% of overall sales four years ago to 70% today.

In addition to distilled spirits, MGP supplies specialty wheat proteins and starches used in meat substitute products and is well-positioned to benefit from growth in this market to $5.2 billion in 2020.

That said, the company's shares recently plunged by almost 28% in a single day recently after it announced considerably weaker preliminary full-year 2019 results than Wall Street was expecting. CEO Gus Griffin said the lackluster guidance was a "result of us ultimately being unsuccessful in transacting a large portion of the aged whiskey sales we had forecast for the fourth quarter," implying the issue wasn't demand, but MGP's ability to execute and capture that demand.

As for the dividend: MGP actually doubled its quarterly payout in 2018, from 4 cents per share to 8 cents per share, then followed that up with a 25% hike in 2019, to a dime. Its payout ratio of 17% provides plenty of runway for future dividend growth.

• Market value: $19.7 billion
• Dividend yield: 1.1%
• 2019 dividend increase: 29%
• CDW Corp. (CDW, $136.85) is an IT solutions provider to more than 250,000 business, government, education and health-care customers in the U.S., Canada and the U.K. It offers cloud computing, collaboration, security, mobility and data center optimization solutions across 100,000 products sourced from 1,000 business partners.

A testimony to just how fractured the IT market is: Despite being a market leader, CDW holds just 5% of the $325 billion opportunity. Growth will come from adding new customers, enhancing capabilities in high-growth solutions areas and expanding service offerings.

CDW's sales rose 11% during the first nine months of 2019, fueling a 13% improvement in adjusted earnings per share. The company is guiding for mid-teen EPS gains for the full year, and expects to exceed its internal goal of growing 200 to 300 basis points faster than the overall American IT market.

Less trumpeted, but still appreciated, is CDW's flourishing dividend. That payout has skyrocketed by 462% since 2015, including a 29% hike in 2019, to 38 cents per share, following a 40% improvement in 2018. CDW's goal is to maintain a payout ratio of roughly 25%, with the dividend growing as profits do.

• Market value: $326.5 billion
• Dividend yield: 0.5%
• 2019 dividend increase: 32%
• Mastercard (MA, $323.65), Visa's chief rival, is another global titan in digital payments. The company's operations span more than 210 countries and territories, and it has processed nearly 79 billion transactions across the nine months ended Sept. 30, 2019. Purchase volume over that time grew from $3.5 trillion, from $3.2 trillion in the year-ago nine-month period, and the company boasted 2.6 billion Mastercard- and Maestro-branded cards worldwide.

Mastercard targets many of the same opportunities that Visa does – its plans for the future include building more into B2B, cross-border B2B and P2P, real-time payments and applications, cyber solutions and data analytics.

The company grew revenues by 15% year-over-year during its third quarter, and profits by 21%. Worldwide, its gross dollar volume (GDV) climbed 14% to $1.65 trillion – U.S. growth was 12%, but 16% across the rest of the world.

Mastercard has been growing both its dividends and share repurchases over the past few years. As of August 2019, MA shareholders had reaped $6 billion from the company via dividends and buybacks – as much as it had spent across all of 2018.

The payout grew by 32% in 2019, to 33 cents per share. Mastercard also cleared the 20% bar with its 2020 hike, announced Jan. 28, to 40 cents per share – a 21% improvement.

• Market value: $17.8 billion
• Dividend yield: 3.5%
• 2019 dividend increase: 33%
• Citizens Financial Group (CFG, $40.87) offers retail and commercial banking services through approximately 1,100 branches in 11 states across the Mid-Atlantic, New England and Midwest regions. Headquartered in Providence, Rhode Island, the bank had $165.7 billion of assets under management as of the end of 2019.

Citizens finished out 2019 with a record fourth quarter for noninterest income, which grew 17% year-over-year on the back of strong mortgage banking, as well as record results from its capital markets, foreign exchange and interest-rate products.

For the full year, net income grew by just 2%, to $1.7 billion, though EPS jumped by 8%, to $3.81, thanks to significant share repurchases. The company's "Citizens Access" digital platform ended 2019 with deposits of $5.8 billion. Mortgage banking fees surged by 45%, while trust and investment services fees grew by 21%.

The company's efficiency initiatives also bore fruit, with the "Top 5" program achieving $125 million in pre-tax run-rate benefits in 2019. Its "top 6" program is expected to generate between $300 million and $325 million in pre-tax run-rate benefits by the end of 2021.

CFG has been among the more aggressive dividend growth stocks of late. It offered up a pair of dividend increases in 2019: an 18.5% increase in January, to 32 cents per share, and a 12.5% bump in July to 36 cents. It's similar to 2018, when Citizens boosted dividends by 22% in January and 23% in July.

• Market value: $619.4 million
• Dividend yield: 1.0%
• 2019 dividend increase: 33%
• Independence Holding (IHC, $41.71) underwrites specialty health and disability insurance through its Standard Security Life, Madison National Life and Independence American insurance subsidiaries. The company also provides short-term disability and family leave policies for small employers, long-term disability insurance for school districts and municipalities, and specialty health and pet insurance.

This company goes through cycles, so revenues and profits tend to ebb and flow. Independence's pre-tax income rose 11% in the September quarter, but EPS declined year-over-year due to reduced tax benefits. The company plans to step up investment in its tech infrastructure to support growth in its pet insurance business and Medicare supplement businesses. The pet insurance market is growing nearly 20% annually; meanwhile, 10,000 new seniors age into the Medicare supplement insurance market every day.

Independence also boasts an AA-rated investment portfolio, no debt and substantial free cash flow that totaled $31.7 last year – more than eight times what it paid out in dividends.

IHC's semiannual dividend grew by 33% in 2019 – that follows a 50% bump in 2018, and a 67% increase in 2017.

• Market value: $7.9 billion
• Dividend yield: 0.9%
• 2019 dividend increase: 33%
• Monolithic Power Systems (MPWR, $181.61) develops and markets high-performance semiconductors used in computer, automotive, industrial, communications and consumer product applications. The company's largest end-market, consumer products, represents nearly one-third of sales; those semiconductors are used in set-top boxes, monitors, home appliances, televisions and other consumer products.

Monolithic Power Systems' profits have been steadily but forcefully expanding by about 36% annually over the past five years, fueled by rising demand in its computer, automotive, industrial and communications business lines. The company plans to grow by building market share in the cloud computing, automotive and telecom markets. During this year's September quarter, sales improved by 8% and adjusted EPS rose 3%.

MPWR is a relatively new dividend payer, having initiated payouts in 2015. Its dividend growth is new, too – distributions were stuck at 20 cents per share quarterly for the first few years, but jumped to 30 cents per share in 2018, then another 33% last year, to 40 cents.

• Market value: $12.2 billion
• Dividend yield: 4.0%
• 2019 dividend increase: 39%

Leading North American brewer Molson Coors Brewing (TAP, $56.57) has been in a downward trend for roughly three years and lost more than 40% of its value in the process. That slump continued in October, after the company reported September-quarter revenue and earnings misses. The weak results were mainly due to volume declines, which the company hopes to offset with increased efficiencies and stepped-up investing in its better-performing brands.

Molson Coors plans to invest more in premium brands such as Blue Moon, Belgian Moon in Canada and Peroni, and expand into new beverage categories such as ciders, wine spritzers and cannabis-infused beverages. The company took one step in that direction in November, announcing a partnership with L.A. Libations, which specializes in emerging non-alcoholic beverages.

At the same time, the company plans to save $600 million over the next three years by consolidating its four business units into two.

To spark some interest in its lackluster shares, Molson Coors announced its first dividend increase in years – a 39% hike to 57 cents per share. The company expects 2020 to be a transition year marked by flat to low-single-digit growth, but the new higher dividend doesn't appear in danger given a moderate 53% payout ratio.

• Market value: $156.5 million
• Dividend yield: 1.6%
• 2019 dividend increase: 40%
• Prudential Bancorp (PBIP, $17.61) is the holding company for Prudential Bank. The Philadelphia-headquartered bank was founded in 1886 and today operates eight branches in its hometown, as well as loan production offices in Huntingdon Valley and Drexel Hill, Pennsylvania. The bank has nearly $1.3 billion in assets.

PBIP recently reported its second straight year of record financial performance, with assets up 19% year-over-year for the fiscal year ended Sept. 30, 2019, and earnings per share surging by 40%. Some of that growth has come on the back of acquisitions; the 2017 purchase of rival Polonia Bancorp added $285 million (more than 50%) to the bank's asset base.

Management attributed strong 2019 results to big gains in interest-earning assets and good expense management, but warned of margin compression due to interest-rate issues.

Prudential Bancorp's dividend has improved a few times over the past few years, but it's not a serial raiser. Nonetheless, investors celebrated a 40% hike in the payout, announced in December, to 7 cents per share. The bank also has issued special dividends in three of the past four years, including 2019. Its 45-cent one-time distribution was thrice the 15 cents it paid in 2018.

• Market value: $4.9 billion
• Dividend yield: 2.2%
• 2019 dividend increase: 41%

Best known for its made-to-order burgers, Wendy's (WEN, $21.69) operates more than 6,700 company-owned and franchised fast-food restaurants worldwide and is the world's third largest quick-service restaurant chain.

During the September quarter, Wendy's opened 40 new restaurants, bringing the total number of new restaurants opened in 2019 to 111. System-wide sales improved nearly 6% and adjusted EPS rose 12%.

A cornerstone of the company's growth strategy is its "1 More Visit, 1 More Dollar" initiative, which seeks to increase same-store sales by launching new menu items. Going forward, Wendy's is aiming for 4% to 5% annual system-wide sales growth, high-single-digit free cash flow growth and a dividend payout ratio of roughly 50%.

Wendy's has been enhancing the annual sum of its quarterly payout for 10 consecutive years, and it delivered two dividend increases in 2019. First, it announced an 18% upgrade in February, to 10 cents per share, then another 20% hike in October to 12 cents. That amounts to a 41% improvement across the year. That said, its payout ratio is now a hefty 80% of earnings. That doesn't mean Wendy's dividend won't improve in future years, but it does indicate the pace of dividend growth might be muted.

• Market value: $1.8 billion
• Dividend yield: 0.8%
• 2019 dividend increase: 50%
• Dillard's (DDS, $71.57) is a department store operating primarily in the Southern and Midwestern U.S. The company operates 259 Dillard's stores and 30 discount centers spanning 29 states. Total store selling space is estimated at 48.9 million square feet.

Despite retail's well-known woes over the past few years, Dillard's shares have at least been holding up, notching 24% gains over the past few years – nothing to scream about, but far better than the likes of JCPenney (JCP) and Sears Holdings (SHLDQ).

The company's September-quarter results were hardly encouraging, however. While retail margins improved and revenues and profits beat analyst estimates, comparable-store sales (stores open for at least 12 months) were flat and profits per share fell by nearly 19%.

Still, free cash flow over the trailing 12 months is 52% better than the year-ago period, reflecting the benefits of Dillard's improved inventory management.

• Market value: $68.5 million
• Dividend yield: 1.1%
• 2019 dividend increase: 50%
• First US Bancshares (FUSB, $11.00) is a small but fast-growing commercial lender providing services through 20 branch offices across Alabama, Tennessee and Virginia. The bank also offers consumer lending through its ALC (Acceptance Loan Company) subsidiary, which has 21 offices across 11 states, and reinsurance through its FUSB Reinsurance segment. The bank currently boasts about $772 million in assets.

The acquisition of a competitor (The People's Bank) in 2018 added $155 million to First US Bancshares' earnings assets and gave it a presence in the fast-growing Knoxville market. The company has identified 18 cities across Alabama, Florida, Georgia, Mississippi, South Carolina and Tennessee as targets for branch expansion, and it recently opened new loan production offices in Mobile, Alabama and Chattanooga, Tennessee.

The bank's EPS shot 227% higher during the first nine months of 2019 as a result of earnings asset growth and merger-related efficiencies of scale. FUSB's earnings have been something of a roller coaster over the past few half-decade, but they're at least pointed in the right direction now.

First US Bancshares had been lifeless on the dividend front, stuck at 2 cents per share quarterly for years. That changed in late November 2019, when the company announced a 50% bump to 3 cents per share.

• Market value: $1.3 billion
• Dividend yield: 3.9%
• 2019 dividend increase: 51%
• Medifast (MED, $115.58) manufactures and distributes weight-loss and wellness products and programs, mostly sold under its Optavia brand. The company differentiates its products from other weight-loss brands with clinical studies that have often led to physician recommendations.

A network of 32,200 active coaches sold Medifast products during the September quarter; sales averaged $5,715 per coach – down 1% year-over-year. That said, sales exploded by 37% in the quarter, and EPS improved by 16%. Despite this strong quarter, the company significantly lowered its full-year outlook. It lowered its previous guidance, for $730 million to $750 million in sales and $6.75 to $6.95 in EPS, to $700 million to $710 million in sales and $5.80 to $5.90 in EPS.

The company expects future growth will come from new products, more coaches, a bigger U.S. footprint and Asia-Pacific expansion. Medifast recently began selling products in Hong Kong and Singapore.

Medifast has been churning out impressive dividend growth over the past few years: a 50% increase in 2017, 56% in 2018 and 51% in 2019, to its current payout of $1.13 per share. However, MED's payout ratio is now 77% of this year's expected profits, which means similar dividend growth will really only be possible on the back of significant earnings expansion. The good news there? Analysts are forecasting a 29% jump in the bottom line in 2020.

• Market value: $88.3 billion
• Dividend yield: 2.0%
• 2019 dividend increase: 56%

Financial advisory firm Goldman Sachs (GS, $249.46) was ranked tops in announced and completed mergers-and-acquisitions deals in 2019, according to Dealogic, as well as No. 1 in equity and equity-related offerings. The company derives 40% of revenues from trading, 25% from asset management, 21% from investment banking and 14% from consumer and wealth management.

The firm's revenues were flat in 2019, at $36.5 billion, but higher expenses and provision for credit losses weighed on EPS, which declined 17% year-over-year. Its quarterly profits have missed expectations twice in a row, too. That said, Goldman's fourth-quarter revenues were strong, with rebounds in asset management and trading driving a 23% jump in the top line.

Goldman Sachs purchased assets being sold at bargain prices by troubled rival Deutsche Bank (DB) in 2019, including an Asian portfolio of equity derivatives valued at $50 billion in September. These asset purchases are helping the bank expand market share.

Goldman's 56% payout bump in 2019 came across a pair of dividend increases: A more modest improvement, from 80 cents per share to 85 cents, announced in April, then a 47% burst to $1.25 announced in July. Even after that considerable hike, GS still pays out less than 20% of its profits as dividends.

• Market value: $16.0 billion
• Dividend yield: 0.8%
• 2019 dividend increase: 56%
• SS&C Technologies (SSNC, $63.47) provides financial software to more than 18,000 clients worldwide. The company is transitioning from a software seller to a software-enabled service business that can generate higher margins and more recurring revenues.

The benefits of this shift were evidenced by the company's 96.4% revenue retention rate in the September quarter and 18% adjusted EPS gains. Operating cash flow surged by 134% during the first nine months of 2019 – a boon that enabled SS&C to pay down debt while continuing to make acquisitions.

That's good, because much of its growth – adjusted EPS have improved by 27% annually since its 2010 initial public offering – has come via M&A. The company closed more than $8 billion in purchase transactions in 2018 alone.

SS&C is handing more of that cash over to shareholders, too. The company boosted its quarterly dividend by 25% to start 2019, then announced another 25% hike in November, to 12.5 cents per share – a total 56% increase across the year. Like many of these dividend growth stocks, SSNC boasts a still-modest payout ratio of 28%.

• Market value: $31.9 billion
• Dividend yield: 1.1%
• 2019 dividend increase: 67%

Toronto-based Barrick Gold (GOLD, $17.95) is one of the world's largest gold producers. After merging with Randgold Resources last year, the company owns five of the industry's top 10 gold assets and two development-stage assets with the potential to become top 10 gold producers. Barrick's operations are expansive, across 15 countries, but most of its actual production comes from low-risk North American mines.

The company's preliminary full-year and fourth-quarter results indicate that Barrick has hit its full-year guidance targets for production. Barrick's preliminary figure for gold production was 5.5 million ounces, versus an expected range of 5.1 million to 5.6 million ounces. Preliminary copper production of 432 million pounds, if it holds, would exceed guidance of 375 million to 430 million pounds.

The company is shedding some of the assets it acquired with Randgold. Barrick and its Senegalese joint venture partner recently agreed to sell their 90% stake in a Senegal gold mine, for up to $430 million. This follows the sale of its 50% stake in the Kalgoorlie Super Pit, one of Australia's largest gold mines, for $750 million a month earlier. Barrick Gold was targeting $1.5 billion of assets sales in 2019 and plans to use some of the proceeds to expand its footprint in copper mining. Demand for copper is rising due to the use of this metal in low-carbon technologies.

Barrick Gold closed out 2018 by issuing an "enhanced" 7-cent-per-share dividend in connection with the Randgold merger (it had paid 3 cents quarterly since the start of 2017). However, its regular payout improved to 4 cents per share starting in 2019, then again to 5 cents later in the year. That represents a 67% improvement from its regular dole from 2018.

• Market value: $10.0 billion
• Dividend yield: 0.2%
• 2019 dividend increase: 67%
• Universal Display (OLED, $212.85) develops and commercializes organic light-emitting diode (OLED) technologies and materials used in smartphones and TVs. Its customers include electronics manufacturers such as Apple (AAPL), LG Display (LPL), BOE Technology, Sharp (SHCAY) and Pioneer. Universal Display holds more than 5,000 patents on its technologies and serves customers from offices in the US, China, Hong Kong, Taiwan, South Korea, Japan and Ireland.

Results have been choppy over the past few years, but generally pointed in the right direction. Revenues have grown roughly 11% per year through the end of 2018; profits have dropped from $1.59 per share to $1.24 per share in that same time frame, but analysts are expecting a $3.10 profit for full-year 2019.

New product launches helped Universal Display deliver 71% sales growth and 184% EPS gains during the first nine months of 2019.

Universal Display is a perfect example of the massive dividend increases that often come shortly after a company initiates payouts. The company began distributing a 3-cent-per-share dividend in 2017, doubled it in 2018, then hiked the payment another 67% in 2019 to a dime per share. Low 13% payout, the company's minimal debt and big cash reserves provide a wide margin for dividend safety.

• Market value: $4.0 billion
• Dividend yield: 0.5%
• 2019 dividend increase: 122%
• UniFirst (UNF, $211.82) supplies workplace uniforms and protective clothing to more than 300,000 customers, and it outfits nearly 2 million workers every business day. Workplace uniforms are a highly concentrated market, with just four companies (including Unifirst) representing more than 40% of industry volume. Growth in the uniform market has been robust at twice the rate of GDP.

The company's solid share of a growing uniform market has fueled roughly 5% annual revenue and EPS gains over the past half-decade, and results that have exceeded analyst estimates in nine of the past 10 quarters.

Unifirst's EPS rose by almost 14% in the fiscal year ended Aug. 31, 2019, on 7% sales growth. The company is guiding for at least 3% sales growth in fiscal 2020, but lower EPS mostly due to the fiscal year being one week shorter than 2019.

Unifirst has ramped up its dividend like a company possessed over the past few years. It announced a tripling of its dividend in 2018, to 11.25 cents per share, then followed that up with a 122% hike announced in October 2019, to 25 cents per share. The outlook for more dividend growth is supported by modest 12% payout, low debt of $45.6 million and cash totaling $356 million.

• Market value: $1.0 billion
• Dividend yield: 4.9%
• 2019 dividend increase: 186%
• Innovative Industrial Properties (IIPR, $82.50) is a rare bird in the real estate world. This real estate investment trust (REIT) acquires, owns and manages specialized industrial properties that are leased to licensed operators of medical cannabis facilities. The company owns a portfolio of 41 properties across 13 states. Its properties are 100% leased and have average remaining lease terms of 15.5 years.

Through the first nine months of 2019, the company had acquired 30 properties across nine states and entered into leasing agreements with 12 new operators. Purchase costs for these properties totaled $106.9 million. To raise capital for more property acquisitions, Innovative Industrial Properties recently issued $134.1 million of exchangeable senior notes and completed a $162.8 million share offering.

Diluting shares like that has consequences – the secondary offering triggered an 18% decline in IIPR's shares in July, and the stock lost more than half its value between then and late October. Still, Innovative Industrial Properties has been explosive by any standard, but especially compared to other REITs. Its stock has delivered a total return (price plus dividends) of 379% over the past three years, versus just 29% for the Vanguard Real Estate ETF (VNQ).

The REIT continues to grow by leaps and bounds, announcing 171% revenue growth during the first nine months of 2019. Adjusted funds from operations (FFO, a measure of profitability for real estate companies) blossomed by 117% on a per-share basis. That has helped shares rebound somewhat off its October lows.

IIPR's biggest fireworks in 2019, however, came courtesy of its rapidly climbing payout. The REIT delivered four dividend increases across the year, climbing from 2018's 35 cents per share to $1 per share by 2019's end – a total improvement of 186%.

• Market value: $24.6 billion
• Dividend yield: 1.2%
• 2019 dividend increase: 450%

Boosted semiannual from 16 cents to 32 cents, then boosted to a quarterly 44 cents. Ends up being 450%.

• Pioneer Natural Resources (PXD, $148.79) – a major oil producer in the Permian Basin, America's most prolific shale oil play – delivered a pair of explosive dividend increases in 2019, with an additional twist.

The company had doled out a 4-cent-per-share semiannual dividend for years since 2009, when it was forced to cut its payout amid the Great Recession. But that changed in 2018, as PXD quadrupled its dividend, to 16 cents per share.

Pioneer then doubled that dole in March 2019, to 32 cents per share, and followed that up by not just raising its regular payout to 44 cents in September, but switching its payout plan from semiannually to quarterly. That projects out to $1.76 per share every year, up from 32 cents last year – a whopping 450% improvement.

As for the company itself: It became a pure play in the Permian Basin last year by selling its Eagle Ford shale assets. It sold its remaining Eagle Ford assets in May of last year, for about $475 million, leaving it with roughly 680,000 net acres in the Midland Basin.

Pioneer has taken advantage of its improved capital efficiency, $100 million of restructuring-related cost savings, and robust cash to boost shareholder returns through share repurchases and dividend growth. In addition to its generous dividend hikes, the company repurchased $728 million shares during the first nine months of 2019 as part of its $2 billion repurchase plan.

If you ask most financial advisers how to retire on a half-million dollars, they’ll likely say it can’t be done.

Many financial advisers point to the “4% rule” (also the “Bengen rule”) for tax-advantaged accounts such as 401(k)s and IRAs. The 4% rule says you can draw up to 4% of your nest egg’s value in your first year of retirement, then add inflation to the prior year’s total and withdraw that each subsequent year, for 30 years, without worrying your money will run out. William Bengen, who first proposed the rule in 1994, later updated that figure to 4.5%.

The median personal income in the U.S. is $33,706 per year, as of 2018 data. Not including Social Security, you’d need about $750,000 in your retirement account(s) to hit that number, if you followed this rule. Depending on where you live, as well as the lifestyle you want to maintain, you’d probably need to start with more. That’s why many advisers point even higher, stating figures between $1 million to $1.5 million as ideal retirement targets.

Brent Weiss, head of planning at Facet Wealth in Baltimore, reminds us there is no one-size-fits-all retirement solution. “In retirement, we face a unique set of risks and many are unknowns,” he says. “From inflation to healthcare costs to longevity, we need to have a plan for them today.” Among those issues is that not every family has as much saved as they need. That’s OK. If you’re wondering how to retire on less than what the traditional wisdom says you need, you have a few options.

These seven high-yield investments may allow you to retire well on a nest egg as small as $500,000. One other aspect of the 4% rule is that any dividends or bond interest you receive diminishes the amount you need to withdraw for your annual income. These seven investments should provide more across dividends and distributions* alone than the U.S. median personal income.

Data is as of Sept. 22. Taxes are not factored into target calculations. Tax considerations will vary widely, with some investors paying no taxes, depending on several factors, including what type of retirement account you have (Roth IRA, traditional IRA, 401(k), etc.), the type of income you are collecting, your level of annual ordinary income, what state you live in and more. *Distributions made by closed-end funds are a combination of dividends, interest income, realized capital gains and return of capital.

A diversified retirement portfolio mixes stocks, bonds and other assets to ensure that, if one asset class crashes, the entire portfolio doesn’t collapse. While high dividends and fixed income will soften the blow somewhat, high-yield stocks and funds still carry some risk. Thus, it’s still best to diversify to add another layer of protection.

Let’s start with larger-company stocks.

The S&P 500 is a 500-company index that holds mostly large-cap stocks such as Apple (AAPL), JPMorgan Chase (JPM) and Exxon Mobil (XOM). It’s generally considered a good representation of the American economy, and it serves as a performance benchmark for thousands of actively managed and index funds.

While the S&P 500 is good for growth, it doesn’t deliver much in dividends. S&P 500 funds yield less than 2% at present. However, we can earn more by investing in a closed-end fund (CEF) that puts a twist on the index. You can learn more about CEFs here, but in short, they’re actively managed funds that can use certain mechanics, such as leveraging debt and trading options, in an attempt to generate outsize income and sharper price gains.

The Nuveen S&P 500 Buy-Write Income Fund (BXMX, $13.06) is a CEF that holds a majority (but not all) of the S&P 500’s components. However, what makes it different is that management also sells call options against its holdings. Traders use this “buy-write” options strategy to generate returns, which is how BXMX offers such a large distribution yield (currently 7.1%).

We also want to get exposure to the tech sector, which is loudly taking over the rest of the American economy. But because technology stocks often funnel most if not all of their cash into research and development, it’s not an income-friendly sector. The yield on the Technology Select Sector SPDR Fund (XLK), an index exchange-traded fund, is just 1.3%.

The BlackRock Science and Technology Trust (BST, $32.71), another closed-end fund with an actively managed tech portfolio, holds 100 mostly larger tech companies, including the likes of Microsoft (MSFT) and Amazon.com (AMZN). However, 30% of its portfolio is invested overseas, so it also holds firms such as Chinese internet giant Tencent Holdings (TCEHY).

Again, an options strategy helps BlackRock Science and Technology generate an outsize yield (5.5%) compared to its more straightforward competitors. But it’s not sacrificing much growth – BST, which came to life in late 2014, has outperformed the XLK 149%-109% on a total-return basis since the start of 2015.

Small-cap stocks and other investments centered on smaller companies might seem like counterintuitive additions to a retirement portfolio. But 1.) Americans are living much longer than they did decades ago, leading more financial advisers to emphasize growth later in life, even into retirement, and 2.) a few investments can still wring income out of smaller companies.

Royce Value Trust (RVT, $14.01) is a straightforward play on small-cap stocks. RVT is the first small-cap closed-end fund, investing in a wide selection of 423 companies currently. No stock accounts for more than 3% of the fund’s assets under management, and the vast majority represent mere fractions of a percent, which insulates the fund from single-stock implosions. Top holdings at the moment include aerospace and electronics company Heico (HEI), thermal imaging camera specialist FLIR Systems (FLIR), and Quaker Chemical (KWR), whose fluids and lubricants are primarily designed for the steel and metalworking industries.

RVT uses a small amount (4.4%) of leverage – taking out debt to invest more money in its holdings – which can help amplify its returns. The fund offers a high 7.7% distribution rate, but understand that much of that distribution is actually returned capital gains. Only a small portion of that is true dividend income, which makes sense given that smaller companies tend to offer little if no dividends.

Another way to invest in extremely small companies with high growth potential is TriplePoint Venture Growth (TPVG, $16.99), a Silicon Valley-based business development corporation (BDC). BDCs step in where many big banks won’t, providing financing to smaller companies – in fact, they were literally created by Congress, just like REITs, to do it. And like REITs, BDCs must pay out at least 90% of their taxable income as dividends.

TPVG employs numerous industry experts who have spent decades financing and fostering tech companies. It invests in the “growth stage” – essentially, the stage of capital needs that occurs right before companies go public. It has gotten in early on some truly impressive businesses, including Square (SQ), digital doorbell service Ring (now owned by Amazon) and YouTube (now owned by Google parent Alphabet). It also was an early investor in Facebook (FB).

TriplePoint Venture Growth has delivered a 103% total return since its 2014 IPO, which is roughly 2.5 times better than the small-cap Russell 2000’s return in the same time frame. Much of that is courtesy of its outsize 8.5% dividend yield.

Real estate investment trusts (REITs) trade on the public exchanges just like stocks, but they’re slightly different than the average company. For one, they’re required to pay out 90% of their taxable profits in the form of dividends, which is their tradeoff for enjoying generous tax exemptions. They’re also not perfectly correlated with stocks – real estate may actually perform well when most other stocks aren’t, and vice versa – so that’s a diversification benefit.

One option for REITs is another closed-end fund: the Cohen & Steers Quality Income Realty Fund (RQI, $15.73). This CEF boasts roughly 131 holdings in the real estate space. However, unlike many funds that hold just the REITs themselves, RQI also has a 14% weighting in their preferred stocks, as well as a small allocation to their corporate bonds – both of which further skew the fund toward providing higher income. Its common-stock holdings include the likes of telecom-infrastructure REIT American Tower (AMT), industrial play Prologis (PLD) and data center operator Equinix (EQIX).

RQI is one of the best funds of its kind. Its 6.1% distribution yield has contributed to an annualized 18.3% total return over the past decade – putting it in the top 1% among its competition. It’s been similarly dominant over the trailing five- and one-year periods.

Investors are increasingly nudged into bonds as they near and eventually enter retirement. That’s because bonds tend to be less volatile than stocks, their returns aren’t uncorrelated with stocks and they provide a source of fixed income that retirees can depend on.

Pimco is one of the largest bond investors in the world, with more than $1.8 trillion in assets under management – most of it in debt products. Pimco Income Strategy II Fund (PFN, $10.28) is a prime example of its prowess.

PFN’s managers, Alfred Murata and Mohit Mittal, invest in a wide range of debt vehicles. The biggest chunk of its assets (27.3%) is in high-yield bonds (otherwise known as junk), with another 26.7% in mortgage-backed securities, nearly 12% in international developed-market sovereign debt, and other sprinklings of investment-grade bonds, U.S. government-related debt, municipal bonds and more.

This fund has doubled, and sometimes even tripled, the “Agg” bond benchmark over most significant time frames, and it typically sits around the top third of funds in its category. The lion’s share of that performance comes from its 9.3% distribution yield.

Municipal bonds are a special subset of debt that deserves its own focus, because they’re not taxed like other debt. Bonds from entities such as states, cities and counties are, at a minimum, exempt from federal tax. And depending on where you live and where those bonds are issued, you might not even have to pay state and local taxes.

While their headline yields often are smaller than regular bonds with similar risk, the tax exemption may offset that difference and more. But if you do invest in municipal bonds, remember: Owning these types of bonds within a tax-deferred account such as an IRA negates that tax benefit.

Consider the MFS High Yield Municipal Trust (CMU, $4.64). One other interesting aspect of CEFs it that, because of how they’re constructed, they can sometimes trade at a premium to the net asset value (NAV) of their holdings – and sometimes at a discount. Right now, numerous muni-bond CEFs trade at small premiums to their NAV. However, CMU trades at a 5.5% discount, which means you’re essentially buying its assets for 94.5 cents on the dollar. Better still? That discount is actually wider than its 10-year average discount of 1.6%.

MFS uses a considerable amount of leverage to generate not only a 4.7% yield, but considerable outperformance over the Bloomberg Barclays Municipal Bond Index benchmark over most significant time periods.

If you were to divide your money evenly across all seven funds, your portfolio would yield 6.99% at current prices. Pour just $500,000 into these investments, and you would generate $34,950 annually – more than $1,200 per year better than the median American personal income.

And naturally, if you have even more money to invest, that nominal income figure will be even higher.

While this list does show you how to retire on a smaller lump sum, remember: these investments, like any other, carry their own risks. CEFs in particular can see more exaggerated price movement, compared to plain index or actively managed ETFs and mutual funds, because of the debt leverage they use. Leverage amplifies gains, sure, but also losses. Also, certain options strategies are great at generating income, but they can cap upside in truly rip-roaring markets. Lastly, everyone’s tax situation is going to be different, which means the amount you’ll need to invest may be different, too.

But these investments do deliver far more of their performance in regular distributions, which can be essential in planning out your finances in retirement. And as shown above, they have (and have demonstrated) the potential to outperform their benchmarks.

Bank earnings season kicked off Friday, April 12, with first-quarter reports from JPMorgan Chase (JPM) and Wells Fargo (WFC). As more reports roll in, investors will be keen to see what a pause in interest-rate hikes and a potential slowdown in economic growth could mean for the sector going forward.

After all, those and other concerns have made financial stocks a market laggard so far this year. The Standard & Poor’s 500-stock index is up a hot 15% for the year through April 10. The financial sector, however, gained just 11% over the same span. The bank subsector was up a bit more than 12%.

But the financial sector might be ready to pivot. Analysts surveyed by Refinitiv expect the sector to post year-over-year Q1 earnings growth of just 2.9%. That doesn’t sound like much, but it’s encouraging when you consider that FactSet estimates the S&P 500’s profits will contract by 4.2% for the quarter.

Which bank stocks are analysts most excited about right now? We screened the Russell 1000 Index for the top-rated small, midsize and large bank stocks. S&P Global Market Intelligence surveys analysts’ ratings on stocks and scores them on a five-point scale, where 1.0 equals “Strong Buy” and 5.0 means “Strong Sell.” Any score of 2.0 or lower means that analysts, on average, rate the stock a “Buy.” The closer the score gets to 1.0, the better.

Here are the 12 best-rated bank stocks as earnings season gets into gear. This group is broken down into the four most-loved stock picks in the small-, mid- and large-cap spaces.

Data is as of April 10, 2019. Companies are listed by strength of analysts’ buy recommendations, from lowest to highest. Dividend yields are calculated by annualizing the most recent quarterly payout and dividing by the share price. Analysts’ ratings are provided by S&P Global Market Intelligence. Expected earnings dates are provided by Briefing.com.

• Market value: $5.1 billion
• Dividend yield: 2.3%
• Analysts’ average recommendation: 1.44

Analysts believe Popular (BPOP, $53.05) is poised for steady-if-not-spectacular growth. The regional bank serving Puerto Rico, New York, New Jersey and Florida is expected to deliver average earnings growth of 5% a year for the next half-decade.

Add in the healthy dividend yield, and you have a stock that Wall Street equity researchers are firmly behind. Analysts at Sandler O’Neill & Partners – which specializes in financial-sector analysis – rate BPOP stock at “Buy.” They say the bank’s “capital position remains extremely robust” and that “BPOP is set up for a very nice 2019.”

Popular’s stock is up about 12% for the year-to-date, lagging the S&P 500 by 3 percentage points. The next potential catalyst is its Q1 earnings report, which is expected to come out ahead of the April 18 market open.

• Market value: $4.2 billion
• Dividend yield: 1.4%
• Analysts’ average recommendation: 1.5

Regional financial stock Sterling Bancorp (STL, $19.88) is having a hot year. Shares are up more than 20% so far in 2019, and analysts think there’s more outperformance to come.

With an average recommendation score of 1.5, the Street leans heavily toward “Strong Buy” and “Buy” calls. Sandler O’Neill analysts base their own “Buy” call partly on the stock’s “compelling valuation.” They also laud the company’s ability to keep a cap on costs: “Expense control has been excellent.”

The regional bank with locations primarily in the greater New York area is expected to deliver annual average earnings growth of 5% for the next five years. Sterling’s next quarterly update should come after the April 24 market close.

• Market value: $4.3 billion
• Dividend yield: 1.2%
• Analysts’ average recommendation: 1.5

Shares in Pinnacle Financial Partners (PNFP, $55.86) are on a tear so far in 2019. PNFP is up more than 21% for the year-to-date, easily outpacing the broader market. Analysts believe the regional bank – which serves Tennessee, North Carolina, South Carolina and Virginia – is set to deliver outsize earnings growth.

Sandler O’Neill analysts, who rate the stock at “Buy,” note that “new revenue producers will continue to fuel future growth.”

The analyst consensus is for earnings to increase at an average annual pace of 32% for the next five years, according to Refinitiv data. No wonder Wall Street’s pros are so bullish on this bank stock, which is set to report its quarterly results after the April 15 close.

• Market value: $4.5 billion
• Dividend yield: N/A
• Analysts’ average recommendation: 1.29

Shares in Western Alliance Bancorporation (WAL, $43.32) – a regional bank with branches in California, Arizona and Nevada – tumbled in March after the Federal Reserve indicated that it wouldn’t raise interest rates again in 2019. Low rates put pressure on banks’ net interest margins, or the difference between what a lender pays for deposits and charges for loans. Thus, WAL was hardly alone in reacting negatively.

Analysts as a group remain bullish on Western Alliance’s stock, however, which has rallied sharply in recent weeks. Indeed, WAL is up 11% since bottoming on March 22. Standard & Poor’s 500-stock index has gained 3% over the same time frame.

The regional bank is forecast to generate average annual earnings growth of 7.5% over the next five years, according to data from Refinitiv. Its quarterly results are expected to come after the April 22 closing bell.

• Market value: $14 billion
• Dividend yield: 4.2%
• Analysts’ average recommendation: 2.39
• Huntington Bancshares (HBAN, $13.30) – a regional bank based in Columbus, Ohio, with branches mainly concentrated in the Midwest – offers a generous dividend yield and high forecast dividend growth.

Concerns about stagnant interest rates and slower economic growth have some analysts leaning toward being more cautious on the stock. Their average recommendation of 2.39 sits between the “Buy” and “Hold” camps.

Analysts expect HBAN to generate average earnings growth of 8% a year for the next five years, according to a survey by Refinitiv. That should help fund a dividend that has doubled from 7 cents per share quarterly to 14 cents since late 2015.

Huntington’s next earnings report is due out ahead of the April 25 market open.

• Market value: $16.4 billion
• Dividend yield: 4.2%
• Analysts’ average recommendation: 2.0

With more than 1,100 branches across 15 states and about $130 billion in assets, Cleveland-based KeyCorp (KEY, $16.39) is one of the largest regional banks in the nation. A hefty dividend yield north of 4% and solid growth prospects have analysts convinced that solid returns still lie ahead.

Zacks Equity Research notes that KeyCorp has been driving growth through acquisitions. Since 2016, the bank has bought out First Niagara Financial Group, HelloWallet and Cain Brothers & Company. Most recently, it closed on its acquisition of Laurel Road Bank’s digital lending business in early April.

Analysts forecast the bank to generate average annual earnings growth of 6.7% for the next five years. Add in the dividend yield of more than 4% and KEY gets an average analyst recommendation of “Buy.”

KeyCorp is expected to report earnings on the morning of April 18.

• Market value: $12.4 billion
• Dividend yield: N/A
• Analysts’ average recommendation: 1.67
• SVB Financial Group (SIVB, $237.27) is a different kind of animal.

SVB, which stands for Silicon Valley Bank, is a go-to bank for tech-sector startups. In addition to commercial banking, the firm offers services ranging from venture capital and private equity to private banking and wealth management.

Sandler O’Neill analysts have a “Buy” rating on this bank stock partly because of its “unique franchise.” The analysts also like SIVB’s “above-average growth and superior deposit base.”

SIVB is up 25% for the year-to-date, which beats the S&P 500 by about 10 percentage points. Despite the run-up in price, analysts have kept their bullish stance. Their average recommendation of 1.67 sits easily on the “Buy” side of the scale. We’ll see if that continues following its next earnings report, due out after the market closes on April 25.

• Market value: $15.7 billion
• Dividend yield: 3.8%
• Analysts’ average recommendation: 1.62

Outsize long-term earnings growth and a generous dividend yield have analysts plenty bullish on Citizens Financial Group (CFG, $34.11), the 13th-largest bank in the U.S.

The regional financial company best known for Citizens Bank branches throughout New England, the Mid-Atlantic and Midwest is forecast to generate average annual earnings growth of almost 13% for the next five years, according to data from Refinitiv. The top line is expected to be a bit more modest, but there’s still upside, with analysts projecting 6.6% revenue growth this year, then 4.2% in 2020.

Analysts’ average price target of $41.20 gives CFG and implied upside of more than 20% over the next 12 months or so, according to Refinitiv. Citizens’ Q1 report is due out ahead of the April 18 open.

• Market value: $27.3 billion
• Dividend yield: 3.3%
• Analysts’ average recommendation: 2.33

SunTrust (STI, $61.56) still has its fans in the analyst community, but stock evaluators have gone into wait-and-see mode pending the finalization of a merger with BB&T (BBT). The $28 billion deal was announced in February and is expected to close before the end of this year.

UBS, for example, downgraded STI to “Neutral” (equivalent of “Hold”) in early March. “Our prior thesis no longer holds; investment case tied to whether BB&T merger creates value,” analysts wrote in a note to clients.

The majority of Wall Street’s pros are on the fence. Of the 27 analysts tracked by S&P Global Market Intelligence, 17 say SunTrust is a “Hold.” Eight call it a “Strong Buy,” while two have it at “Buy.”

• Market value: $36.8 billion
• Dividend yield: 3.4%
• Analysts’ average recommendation: 2.29

With nearly 1,900 branches and almost $220 billion in assets, BB&T (BBT, $48.11) was already one of the nation’s largest regional banks. Once it completes its merger with SunTrust, the combined firm will become the nation’s sixth biggest bank by assets.

However, analysts on average are merely upbeat, but not uber-enthused, about BB&T’s prospects.

Sandler O’Neill, for instance, applauds the SunTrust merger. But it also thinks investors should wait for a better entry point on BBT stock. The analysis outfit has a “Hold” rating on the shares, which is not an uncommon view. Fifteen of the 24 analysts tracked by S&P Global Market Intelligence fall in the middle. Only eight call BBT a “Strong Buy,” and one other analyst says “Buy.”

The large regional bank will report its latest financial results before the April 18 open.

• Market value: $280.2 billion
• Dividend yield: 2.1%
• Analysts’ average recommendation: 2.10

Shares in Bank of America (BAC, $29.07), the nation’s second largest bank by assets, are up a market-beating 18% so far in 2019.

With an average recommendation of 2.10, analysts are mostly bullish on the mega-cap financial stock, but there are a significant number of “Hold” calls. Of the 30 analysts surveyed by S&P Global Market Intelligence, 10 say BAC is a “Strong Buy” and seven have it at “Buy.” The remaining 13 analysts call it a “Hold.” That includes HSBC’s Alevizos Alevizakos, who started BofA at “Hold” on concerns such as margin contraction and declining loan growth.

Still, analysts forecast BAC to generate average annual earnings growth of 21% for the next five years. Their average target price of $33.17 gives the stock implied upside of 14% in the next 12 months or so.

Bank of America’s results should come before the April 16 opening bell.

• Market value: $153.4 billion
• Dividend yield: 2.8%
• Analysts’ average recommendation: 1.79

Analysts as a group aren’t as jubilant about large bank stocks as they are about the sector’s midsize and smaller companies. But Citigroup (C, $65.52), the nation’s fourth largest bank by assets, has a cleanly bullish camp. With an average recommendation of 1.79, analysts are split on whether the massive money center bank is a “Strong Buy” or a “Buy.”

As well they should be. With an average price target of $77.64, according to Refinitiv, shares in Citigroup have implied upside of more than 18% in the next 12 months or so.

UBS analysts, who rate Citigroup stock at “Buy,” say “a low bar could set (the) stage for near-term outperformance.” Shares in the bank are up 26% year-to-date already.

Wall Street expects average annual earnings growth of nearly 17% over the next five years. For the quarter to be reported ahead of the April 15 opening bell, expectations for profit growth are a bit more subdued at 7.1%, but still better than the sector average.

In good times and bad, dividend stocks act almost like rent checks, coming monthly or quarterly like clockwork. Many investors, whether you’re a professional working on Wall Street or a regular Joe on Main Street, swear by them.

It’s a big reason why assets in U.S. dividend exchange-traded funds (ETFs) have grown exponentially over the past decade. In 2009, U.S. dividend ETF assets were less than $20 billion. By the middle of 2018, they had increased to more than $170 billion.

The reason: Dividend ETFs provide investors with a diversified portfolio of dividend-paying stocks that allows you to invest and collect income without having to do nearly the amount of research you’d need before buying a large number of the individual components.

If you’re in this camp of hopeful set-it-and-forget-it investors, here are seven dividend ETFs to buy and hold for the long haul. Diversified by geography, style, size, sector, etc., this collection of ETFs can be held as a group or individually depending on your preferences, risk tolerance and investment horizon.

Data is as of March 3, 2018. Yields represent the trailing 12-month yield, which is a standard measure for equity funds.

• Type: Domestic large-cap
• Market value: $22.8 billion
• Dividend yield: 3.1%
• Expenses: 0.06%

When you’re building a portfolio of any kind – whether it’s with stocks, ETFs, mutual funds or other vehicles – you need a solid foundation. Without it, you won’t be able to withstand difficult times such as December 2018, when the Standard & Poor’s 500-stock index lost 9% of its value in a single month.

That’s why we will start with the Vanguard High Dividend Yield ETF (VYM, $86.21), a domestic large-cap ETF that tracks the performance of the FTSE High Dividend Yield Index – an index that invests in stocks with a history of above-average dividend yields.

You might be thinking, “Aren’t high yields a sign of a deteriorating business?”

While that can be the case in certain situations, the roster of stocks in VYM’s top 10 holdings (which account for roughly 27% of the fund’s assets under management) are some of America’s largest and most stable companies – Johnson & Johnson (JNJ), JPMorgan Chase (JPM), Exxon Mobil (XOM).

VYM yields more than 3% but sports a rock-bottom expense ratio of 0.06%, and it has delivered an average annual return of 7.7% since its inception in November 2006 – a great combination of low fees, a healthy overall yield and nice long-term returns.

That’s a strong foundation.

• Type: Domestic mid-cap
• Market value: $3.7 billion
• Dividend yield: 2.3%
• Expenses: 0.38%

Mid-cap stocks are the motor that drives a strong portfolio.

Large caps are smart to own because those businesses won’t disappear overnight. And a few small-cap stocks can go a long way, as you’ll never known when one of them will be the next Netflix (NFLX) or Amazon (AMZN).

But mid-caps strike a wonderful balance between growth and stability, making them a natural fit if you want to achieve alpha without a high amount of additional risk.

The WisdomTree U.S. MidCap Dividend Fund (DON, $35.99) tracks the WisdomTree U.S. MidCap Dividend Index. To select the 402 holdings in the index, WisdomTree first compiles a list of investable U.S. dividend-paying stocks. It then excludes the 300 largest stocks by market cap. Lastly, it selects for inclusion the top 75% of the remaining stocks by market value. The holdings are fundamentally weighted and reconstituted annually in December.

This portfolio weights four sectors in double digits: consumer discretionary (19.6%), real estate (14.7%), industrials (13.8%) and financials (10.2%). Four more are weighted between 5% and 10%. That speaks to a high level of diversification, as does the fact that DON’s top 10 holdings account for just roughly 10% of the portfolio.

This ETF got its start in June 2006 and has delivered a 9.2% average annual return for shareholders ever since.

• Type: Domestic large-cap
• Market value: $722.2 million
• Dividend yield: 1.5%
• Expenses: 0.50%

As the name suggests, the First Trust Rising Dividend Achievers ETF (RDVY, $30.49) invests in companies that have a history of increasing their dividends annually. But it also seeks out characteristics such as strong cash flow, solid balance sheets and growing earnings – factors that suggest the dividend increases will continue.

The ETF tracks the NASDAQ US Rising Dividend Achievers Index – a group of 50 large-, mid- and small-cap stocks that trade on U.S. stock exchanges and have paid a dividend in the trailing 12-month period that’s greater than the dividend paid three and five years earlier. To be included in the index, a company must also exhibit these three financial characteristics:

• First, a company’s most recent fiscal year’s earnings per share must be higher than in any of the three previous years.
• Second, a company must have a cash-to-debt ratio higher than 50%
• Third, a company’s 12-month payout ratio must be less than or equal to 65%.

There’s more to the methodology, but those are the important points. The result is a median market cap of $36.6 billion that reflects a roughly 70% allocation to large-cap stocks, 28% to mid-caps and a tiny remainder dedicated to small caps.

RDVY is a little on the expensive side, but it does a good job targeting financially stable companies that still have plenty of growth underneath the hood, but have clearly made rising income a priority, too, thus making it an excellent dividend ETF to buy.

• Type: Domestic small-cap
• Market value: $65.8 million
• Dividend yield: 3.1%
• Expenses: 0.35%

The biggest concern for investors when it comes to small-cap stocks is volatility. By their very nature – smaller market values, less revenue, fewer shareholders – companies with market values of less than $3 billion can be difficult to own when one alternative is to hold an ETF of blue chips such as those in the S&P 500 and call it a day.

But the VictoryShares US Small Cap High Dividend Volatility Weighted ETF (CSB, $45.33) does a good job weeding out small companies whose stocks exhibit excessive volatility.

CSB tracks the Nasdaq Victory US Small Cap High Dividend 100 Volatility Weighted Index. This index takes the 500 largest U.S. companies that have made money in each of the past four quarters and have a market cap less than $3 billion, whittling it down to the 100 highest-yielding stocks. It weights the stocks by their standard deviation (volatility) of daily price changes over the past 180 trading days. The lower the volatility, the higher the weighting.

As a result of the volatility weighting combined with the dividend-paying aspect of the ETF, you’ll notice the top 10 holdings are heavy in financials, which account for roughly 24% of the company’s assets. CSB also has high concentrations in industrials (23.4%), consumer discretionary (16.4%) and utilities (10.7%).

At 0.35%, CSB provides dividend investors with decent income and upside capital appreciation without taking too much risk.

• Type: Foreign emerging-markets large-cap
• Market value: $2.3 billion
• Dividend yield: 2.8%
• Expenses: 0.39%

The United States represents a little more than 35% of the world’s capital markets. Yet, Americans have put almost 75% of their investments in U.S.-based assets. Experts call this “home-country bias.” It’s not deadly, but it’s still a good idea to broaden your investment horizons beyond our shores.

The next three ETFs are dedicated to that – they have reasonable fees, own dividend-paying stocks and invest primarily in large-cap stocks, reducing (albeit not eliminating) the risks involved with investing in international equities.

The Schwab Fundamental Emerging Markets Large Company Index ETF (FNDE, $27.96) invests in 366 companies based in emerging markets such as South Korea, China, Taiwan, Russia and Brazil. FNDE leans toward bigger, larger companies, with 28% of the portfolio invested in market caps of $70 billion or higher. Just 5% of its net assets are invested in small- or mid-cap stocks valued at $3 billion or less.

Emerging markets have gotten a bad rap in recent years because of terrible performance relative to the U.S., but that’s provided investors with a significant buying opportunity.

“A large cross-section of emerging market companies have improved balance sheets and have been showing an improvement in profit margins,” U.K.-based River & Mercantile portfolio manager Al Bryant recently told Morningstar. “Dividend yields also now average above 3% for emerging market stocks, which has been a decent historical signal for subsequent gains.”

Throw off the shackles of home-country bias and jump on the emerging-markets bandwagon.

• Type: Foreign large-cap
• Market value: $827.3 million
• Dividend yield: 4.7%
• Expenses: 0.45%

When it comes to State Street ETFs, most investors think of the $264 billion SPDR S&P 500 ETF (SPY), the largest ETF in the U.S. by a country mile. By comparison, the SPDR S&P International Dividend ETF (DWX, $37.75) seems like a rounding error.

But what the DWX lacks in size, it makes up for in quality, not to mention simplicity.

The DWX, which tracks the S&P International Dividend Opportunities Index, gives you access to 100 of the highest-yielding international stocks meeting specific sustainability and earnings growth criteria, including positive earnings per share (excluding extraordinary items) over the latest 12-month period.

More importantly, no sector or country can account for more than 25% of the portfolio, emerging markets are capped at 15%, and no individual stock can exceed a 3% weighting, ensuring that diversification remains intact.

It’s not the cheapest international dividend ETF, but it gets the job done. Over the past three years, it has delivered an annual total return of 10.2% for unitholders – 2.6 percentage points better than the average in the foreign large-cap value category.

• Type: Foreign large-cap
• Market value: $4.3 billion
• Dividend yield: 5.4%
• Expenses: 0.50%

If you’re a fan of financial stocks, iShares International Select Dividend ETF (IDV, $31.77) is for you. Financials represent 31% of the ETFs $4.3 billion in net assets, all of them in developed markets outside the U.S.

However, it’s important to note that the United Kingdom accounts for a little more than 25% of the portfolio – much bigger than second-largest weight Australia, which earns a 16% allocation. Canada is also notable at a fourth-place 6%.

Like DWX, IDV invests in 100 of the highest-yielding dividend stocks outside the U.S. It the Dow Jones EPAC Select Dividend Index, which selects stocks delivering consistently high dividend yields from the Dow Jones Developed Markets ex-U.S. Index. Real estate investment trusts (REITs) and U.S. stocks are excluded.

If you’re partial to ETFs that invest across all market caps, you ought to like IDV. Out of the 100 stocks in the portfolio, 62% are large caps, 28% are mid-caps and 10% are small caps.

Performance-wise, IDV has delivered an average annual total return of 12.2% over the past decade – 3.3 percentage points better than its category. Much of that performance comes via a massive yield that sits at more than 5% over the trailing 12 months.

As 2018 expires, I imagine you’re resigned to negative returns on most of your bonds and perhaps unhappy that such perennial winners as real estate investment trusts, utility shares and preferred stocks are treading water. That’s understandable. But I maintain that largely standing pat with these holdings and ignoring shrill warnings about an encroaching bear market, gathering U.S. recession and global chaos is still advisable.

I refuse to call a loss of, say, 1.2% on JPMorgan preferreds or 1.5% on American Electric Power shares ter­rible or even significant because you have been paid well for years and can expect future interest and dividends to arrive in full and on time. The paucity of defaults, bankruptcies and dividend cuts separates the volatility of 2018 from past wipeouts.

Moreover, I’m not spooked by global events, such as the recent Italian bond-market plunge or the election of an unpredictable populist president in Brazil. In recent years, the Greek sovereign debt crisis, Brexit and the “taper tantrum” that pushed bond yields up after the Federal Reserve decided to wind down its bond-buying program all passed without harming portfolios much. More than a few established income-and-growth investments with unique attributes, an especially timely niche or a tech­nological advantage can extend fine 2018 returns, despite higher Treasury yields or the possibility that a struggling emerging-market economy will go belly-up. Stake your claim to sound sectors, select good names within each, and you’ll be fine.

Bucking a chaotic trend. The following fab five benefit from strong economic growth and inexpensive fixed-rate debt that does not need to be refinanced right away. They are expensive to buy at times, but in higher-yielding categories you often get what you pay for. Moreover, nothing that has happened this year or that looms over 2019 should threaten these elites.

If you appreciate the power of borrowing at low fixed rates and lending at high variable ones, you’ll like specialty finance company Ares Capital (symbol ARCC, price $16, yield 9.5%). At Ares, 91% of the credit it extends to 346 businesses is floating rate, more than 70% is secured, and much of it pays Ares more than 10%. More than half of Ares’s own borrowings are fixed-rate, and the companywide cost of credit is just 4.1%. Defaults and other impairments are less than 1%.

Exelon (EXC, $43, 3.2%) is making up for lost time. Five years have passed since the utility’s share price cratered 50% (it’s more than back), and yet some analysts still hesitate to accord it full respect. I’m not saying to avoid or dump other utilities, just noting that Exelon has been exceptional of late.

Lamar Advertising (LAMR, $72, 5.1%) is a real estate investment trust that intends to speed up its wildly successful conversion of roadside billboards from static signs to digital message boards, a business model it pioneered.

I cannot overpraise Magellan Midstream Partners (MMP, $64, 5.9%), a massive pipeline operation that carries gasoline and other refined products. This toll-road-type enterprise doesn’t benefit directly from higher oil prices, but its shares do because when oil gets rich, investors flock to broad energy-related funds that include a position in Magellan.

Quality isn’t cheap. So I am un­deterred by the high premiums commanded by shares in Pimco’s diversified closed-end credit funds over the net asset value of the secur­ities in the funds’ portfolios. Pimco Corporate & Income Strategy Fund (PCN, $17, 7.8%) trades at 19% over NAV, so maybe you ought to wait until the premium shrinks closer to 12%. But the share price is stable, net investment income covers the distributions (or comes close), and the portfolio management is splendid.

Bank stocks and other financial equities are back in the spotlight again with the dawn of another earnings season. And any wind in their sails is sure to be felt by bank ETFs.

The financial sector helps kick off each quarter’s run of earnings reports, starting with majors such as JPMorgan Chase (JPM) and Citigroup (C), then followed by regional banks, insurers and stock brokers. Robust economic activity means more business for banks – more mortgages, auto loans and business loans, as well as spending via personal credit – and that should show up in their quarterly reports.

Another bullish driver: The Federal Reserve has raised the fed funds rate three times in 2018 alone – which in turn is helping lift interest rates – to help keep America’s economy from heating up too much. That is a good problem to have, especially if you hold bank stocks and funds. Rising rates help banks by improving their net interest margin (the spread between what banks pay out in interest on deposits and what they earn in interest from mortgages and other loans). It’s no guarantee – higher rates can also dissuade consumers from taking out loans – but broadly, rising rates are viewed as bullish for banks and other financial stocks.

These seven bank ETFs provide varying ways to gain exposure to any continued growth in the financial sector.

Data is as of Oct. 11, 2018. Click on ticker-symbol links in each slide for current share prices and more. Yields represent the trailing 12-month yield, which is a standard measure for equity funds.

• Market value: $29.9 billion
• Dividend yield: 1.7%
• Expenses: 0.13%, or $13 annually on $10,000 invested

The Financial Select Sector SPDR Fund (XLF, $26.40) is far and away the largest financial ETF by assets under management, at $29.9 billion – more than triple the next-closest fund, the Vanguard Financials ETF (VFH). It also is a member of the Kip ETF 20, Kiplinger’s list of 20 high-quality exchange-traded funds.

It’s also one of the most diversified ways to invest in the financial sector, though that means XLF is not a pure play on American bank stocks.

Pure-play banks make up just 44% of this fund, with the lion’s share coming from the Big Four banks – JPMorgan, Citigroup, Bank of America (BAC) and Wells Fargo (WFC), and their combined 33% weight. But while JPMorgan is a massive overweight at 11% of assets, it’s not the biggest – that title goes to Warren Buffett’s Berkshire Hathaway (BRK.B, 12.8%), making up nearly all of XLF’s “Diversified Financial Services” allocation.

The rest of the fund is invested across capital markets and consumer finance companies, but also includes a 17% holding in insurers such as Chubb (CB) and MetLife (MET). Insurers obviously are a different business than traditional banks, but still benefit as rates rise by investing their money into higher-yielding bonds.

• Market value: $1.6 billion
• Dividend yield: 1.4%
• Expenses: 0.43%

The iShares U.S. Financial Services ETF (IYG, $126.20) has a slightly narrower mandate than the XLF. It targets commercial banks, asset managers and even credit card companies, but eschews other financial industries – most notably, insurance.

The Big Four play a similarly large role at nearly 35% of the fund, and pure-play banks make up more than half of all assets. But you also get access to the likes of Visa (V) and Mastercard (MA), which are obvious beneficiaries of a roaring economy, as Americans swipe, swipe, swipe their way through more purchases. Credit card companies also have growth appeal as Americans increasingly walk away from cash – a trend that is benefiting from increased adoption of online and mobile transactions.

IYG also invests in companies such as Goldman Sachs (GS) and Morgan Stanley (MS), which lend to corporate clients much like regular banks, but also provide services such as investment management, as well as equity and debt underwriting. That provides a little additional protection against bank-specific downturns.

• Market value: $849.2 million
• Dividend yield: 1.9%
• Expenses: 0.35%

If you are looking for more dedicated bank exposure, the PowerShares KBW Bank Portfolio (KBWB, $52.25) is more your speed. It is one of just a handful of ETFs that provide access specifically to American mega-banks and big regionals.

The KBWB holds just 24 stocks, including the “Big Four.” And as one would expect in such a concentrated portfolio, those larger companies make up a significant portion of the fund – about 33% of the fund’s assets.

However, KBWB’s modified market-cap weighting system ensures that larger regionals – which are a mere fraction of mega-banks’ size – still carry significant heft. For instance, Citigroup, which has a market capitalization of $177 billion, is the top weight at 8.4%, but North Carolina-headquartered BB&T Corp. (BBT) is a 4% weight despite its relatively modest $37 billion market cap. This helps reduce single-stock risk to a small degree.

• Market value: $4.7 billion
• Dividend yield: 1.7%
• Expenses: 0.35%

More growth-minded investors might want to think smaller about their bank-stock exposure.

Regional banks benefit from many of the same drivers as larger financials, such as rising interest rates helping to bolster net interest margin. However, there’s also potential in the form of mergers and acquisitions. The commercial banking space has been shrinking for more than a decade, from 7,870 banks in 2002 to 5,102 in 2016. The financial crisis of 2007-09 shook out some weaker hands, but the number of FDIC-insured commercial banks in the U.S. has been falling even as the industry has recovered. Some of that consolidation has come as larger regional banks swallow up smaller players.

That shines a positive light on funds such as the SPDR S&P Regional Banking ETF (KRE, $57.21), which holds more than 100 regional banks, mostly in the mid- and small-rap ranges.

This is a riskier area, naturally. Regional banks’ health can ebb and flow with the health of their respective regional economies. But you can mitigate some of that risk by holding a geographically diverse fund such as the KRE. This fund also tamps down risk with its equal-weighting methodology, which levels out all holdings upon each rebalancing, ensuring no single stock’s failure can deep-six the entire fund.

• Market value: $362.2 million
• Dividend yield: 1.3%
• Expenses: 0.6%

Investors who want to take the regional theme even farther – especially trying to exploit the potential for share-price spikes thanks to acquisitions – may consider the First Trust Nasdaq ABA Community Bank Index (QABA, $51.40), which invests in smaller regional and community banks.

This First Trust bank ETF holds roughly 170 stocks. To give you an idea about size, understand that the median market cap for the aforementioned SPDR S&P Regional Banking ETF sits at $5.3 billion, while the average QABA constituent is a mere $2.3 billion. And while just 28% of KRE’s portfolio is dedicated to small- and micro-cap stocks, more than 60% of QABA’s assets are invested in these smaller companies. That is largely because QABA’s benchmark index automatically excludes the 50 largest banks or thrifts (including holding companies) based on asset size.

QABA is market-cap weighted, but there are no serious overweights in the portfolio. East West Bancorp (EWBC) – the parent of independent commercial bank East West Bank, which operates out of California – is the top weight at 3.3%. And despite its focus on small caps, QABA boasts a smaller standard deviation (a volatility measure) than KBE and KRE over the past three years.

• Market value: $369.0 million
• Dividend yield: 1.7%
• Expenses: 0.4%

The Invesco S&P Equal Weight Financials ETF (RYF, $41.03) provides wide financial-sector exposure, but with a twist that conservative investors should like.

The RYF holds the same group of 67 securities as the aforementioned XLF; however, it equally weights the portfolio at every rebalancing, throwing market capitalization out the window. That’s how you get top holdings such as annuity and life insurance provider Brighthouse Financial (BHF), which is the smallest holding in the XLF. That doesn’t mean BHF is swelling its chest at anyone; the stock occupies a mere 1.64% of the fund, while the smallest top-10 holding, CBOE Global Markets (CBOE), makes up 1.55%. This is balance personified.

This weighting system greatly eliminates the risk of a sudden collapse in, say, Berkshire or JPMorgan, but it does skew the industry allocations significantly. Namely, insurance (33.6%) and capital markets (30.5%) are the biggest hitters in the fund. Banks are relegated to just more than a quarter of assets.

That makes the RYF a so-so way to express your bullishness on banks … but a strong way for the risk-averse to go long the American financial sector.

• Market value: $32.0 million
• Dividend yield: 1.2%
• Expenses: 0.6%

Finally, the Invesco DWA Financial Momentum ETF (PFI, $32.05) is a way to essentially double down on winners in the U.S. financial sector.

The PFI currently is made up of roughly 50 stocks from a financial-sector index that are selected for their high “relative strength,” or “momentum.” Invesco defines momentum as the “the tendency of an investment to exhibit persistence in its relative performance.” Another way of putting it is that PFI highly values stocks that have done well recently, believing that those stocks are the likeliest to continue performing well.

At each rebalancing, this ETF chooses at least 30 financial stocks with the highest momentum scores, though the number clearly varies. At the moment, this results in a 35% weighting in banks - not particularly heavy, but the biggest allocation, ahead of insurance (22%) and capital markets (21%). Top holdings include Mastercard, JPMorgan Chase and ratings agency Moody’s (MCO). While this strategy would seem to benefit the fund most during extremely bullish periods, PFI actually shines most when the chips are down. The ETF lost 27.2% in 2018 versus the XLF’s 55% in 2008, and just 4.6% in 2011 versus 17.2% for XLF.

Vanguard funds have become synonymous with index investing. But if you limit yourself to the firm’s passive strategies, you’ll miss some gems. Indeed, Vanguard fund managers actually invest more of their own money in the firm’s actively managed funds than in their index funds.

Vanguard has such good actively managed funds for two major reasons. One, because Vanguard is owned by its mutual fund shareholders, it has no outside owners to pay — and thus can keep its fees lower than most other fund firms. The other reason: Despite founder Jack Bogle’s advocacy of index-fund investing, he was surprisingly good at identifying talented outside stock pickers and signing them up to manage assets for Vanguard during his tenure.

Soon after Bogle founded Vanguard, he signed up Wellington Management, where he had formerly worked, to manage funds for Vanguard. Wellington runs some superb funds. His other find was Primecap, which was formed by three talented managers who left American Funds in 1983. Bogle signed them to launch Vanguard Primecap (VPMCX), one of the most successful mutual funds of the past 45 years.

Here are the five most impressive Vanguard actively managed funds that are open to new investors. (Note: Some are only available directly through Vanguard.)

Data is as of Sept. 20, 2018.

• Expense ratio: 0.25%Minimum investment: $3,000

Edward Bousa, who has managed the stock portion for 15 years, invests about half of the equity holdings in large, dividend-paying companies with sustainable competitive advantages. The rest goes into somewhat racier large companies. Owning both types helps smooth out returns, and results in a 2.6% yield.

A few other notes:

• VWELX leans toward statistically undervalued stocks.
• Financials are the largest sector weighting at 23% of assets.
• Foreign stocks make up 18% of the fund.
• Top holdings include Microsoft (MSFT), JPMorgan Chase (JPM) and Alphabet (GOOGL), the parent of Google.

John Keogh, who has managed the bond portion for 12 years, sticks to high-quality debt. Less than 20% of the bonds are rated BBB or lower; the rest are all single-A or higher. The bonds have a relatively long duration of 6.4 years, implying the fund should lose 6.4% in price if rates rise by 1 percentage point.

The bond holdings mean you probably won’t beat the market with this fund when stocks are rising, but you should come comfortably close. Over the past 15 years, this Kiplinger 25 mutual fund has trailed the Standard & Poor’s 500-stock index by an average of about 0.9 percentage points per year. But the ride has been much smoother: The fund has been about one-third less volatile than the S&P 500 thanks to those bonds.

Expenses are 0.25% on the investor shares, or $25 annually for every $10,000 you invest. Admiral shares (VWENX), with an initial minimum of $50,000, charge just 0.17%. The fund only is available to new investors if purchased directly through Vanguard, however.

• Expense ratio: 0.38%Minimum investment: $3,000

Health care, then, is one sector that tends to do well in both bull and bear markets.

Vanguard Health Care’s record is beyond incredible. Over the past 30 years, the fund has returned an annualized 15.8%. During the past 15 years, it returned 11.9% on average — 2.5 percentage points better per year than the S&P 500.

VGHCX is more conservative than most of its rivals. And with $50 billion in assets, it has few holdings in small, startup biotech stocks. The fund instead sticks to two broad themes: Companies coming up with innovative medical treatments and companies helping to slow the rate of increase in health care costs.

Assets are spread widely within this broad sector. Just less than half the fund is in traditional drug companies, 16% is in biotech, 12% is in health insurance companies and 12% is in medical devices.

Manager Jean Hynes, at Wellington Management, has worked on this fund since 1991. She works with a team of nine analysts, managers and research associates, including at least one physician.

The investor shares’ 0.38% expenses are low, but the Admiral shares (VGHAX, $50,000 minimum) are even cheaper at 0.33%.

• Expense ratio: 0.45%Minimum investment: $3,000

What’s more, the fund has done well lately, too, gaining 7% over the past 12 months — 6 percentage points better than the MSCI index.

Baillie Gifford Overseas runs about 60% of the fund, and Schroder Investment Management manages the other 40%. Both are respected money management firms.

Baillie Gifford is willing to pay up for companies it thinks will grow rapidly. Its managers are focused primarily on two themes: technology and emerging markets, mainly Chinese internet companies, including Alibaba (BABA), Tencent (TCEHY) and Baidu (BIDU). Schroder is less racy, investing most of its assets in stocks that offer growth-at-a-reasonable price.

The fund has excelled even though it currently has 23% of its assets in emerging markets at a time when EMs have performed horribly. A 10% stake in U.S. stocks, including Amazon.com (AMZN), has helped returns.

At the same time, this isn’t a fund for the faint of heart; it has beaten its peers in good markets but trailed in bad markets. This is a risky fund; don’t overdo it.

• Expense ratio: 0.2%Minimum investment: $3,000

Thanks to rising short-term interest rates, the fund yields a healthy 3.14%. Yet the duration is only 2.5 years — meaning the fund’s price should drop just 2.5 percentage points should interest rates rise by a percentage point. In a high-quality bond fund, it’s useful to think of the duration as the fund’s risk and the yield as its reward. There are few investment-grade funds today whose yield is higher than its duration.

In bond funds, where returns often are counted in basis points (a hundredth of a percentage point), expenses are big consideration. The investor shares charge 0.2%. The Admiral shares (VFSUX), with a $50,000 minimum, charge half that (0.1%), and that discount boosts the yield to 3.24%.

This fund won’t make you rich. Over the past 10 years, it returned an annualized 3%. I think it’ll earn roughly the same in the coming years. The beauty of this fund is that it will provide ballast to your stocks, along with some income — and won’t get you killed should rates spike.

The fund is run in-house by Vanguard, which is shuffling managers on this and other bond funds. I’m not worried given how plain vanilla this fund is.

• Expense ratio: 0.67%Minimum investment: $2,000

Vanguard Primecap is one of three Vanguard funds managed by Primecap – all of which are closed to new investors. Vanguard was wise to close them; assets were flooding in the doors because all of them, VPMCX included, are quality offerings.

Primecap Odyssey Growth is your answer if you’re shut out of VPMCX. It charges 0.67% annually – 28 basis points more than Vanguard’s near-clone, but still cheaper than the overwhelming majority of other actively managed funds.

While the two Wellington-managed funds we considered are conservative, Primecap Odyssey Growth is a pedal-to-the-metal growth shop. The fund focuses on two sectors: One-third of assets each are in technology and health care. The fund is about 46% more volatile than the S&P 500.

No, this fund is not for your conservative money.

But find an aggressive corner of your portfolio for Odyssey Growth, hang on for dear life, and eventually you’ll earn plus-size profits. The fund lagged the S&P during the 2007-09 bear market and the 2015-16 correction. But over the past 10 years, the fund returned an annualized 14.4% — an average of 3.2 percentage points per year better than the S&P 500.

Steve Goldberg is an investment adviser in the Washington, D.C., area.

MLPs, often spin-offs from energy companies, operate large parts of the nation's energy infrastructure, such as oil pipelines, natural gas processing facilities and storage depots. Because they pass most of their cash flow through to investors, they're popular with income seekers. But MLP shares plunged in March after a tax ruling by the Federal Energy Regulatory Commission raised fears that some pipeline firms' cash flows could be crimped.

Earnings for All

• 35 Ways to Earn Up to 11% on Your Money
• Short-Term Accounts: 1%-2%
• Muncipal Bonds: 2%-3%
• Investment-Grade Bonds: 3%-4%
• Foreign Bonds: 3%-5%
• High-Yield bonds: 3%-6%
• Dividend-Paying Stocks: 4%-6%
• Real-Estate Investment Trusts: 4%-9%
• Closed-End Funds: 4%-9%
• Master Limited Partnerships: 8%-11%

The risks: Analysts say the FERC ruling will have little or no effect on many MLPs. But the move was another blow to the sector, which suffered with the crash in oil and natural gas prices from mid 2014 to early 2016. JPMorgan Chase analysts say that even though rising U.S. oil and gas production is good news for energy-infrastructure firms, fierce competition and the inability of many MLPs to take on more debt could make growth in cash flow and shareholder payouts more difficult for some players. Higher interest rates are also a headwind. And because of the tax issues with MLPs, it's smart to consult a tax adviser before buying.

How to invest: Despite the risks, with MLP share prices beaten down to their lowest levels in at least two years, investors can find high-yielding bargains now. Goldman Sachs recommends Western Gas Partners (WES, $46, 7.9%), which transports and treats natural gas and oil for Anadarko Petroleum and other energy giants. Western, which operates from the Rocky Mountains to Pennsylvania, is on track to generate payouts of $3.83 per share this year and $4.07 in 2019, Goldman says. JPMorgan likes Andeavor Logistics (ANDX, $48, 8.4%), which operates oil and gas pipelines, processing facilities, and storage centers in the western and mid-continent regions. The MLP is expected to pay out $3.90 per share this year and $4.15 in 2019.

MLPs on brokerage firm Stifel's buy list include Green Plains Partners (GPP, $18, 11.0%), which owns and operates storage tanks, terminals and other facilities for Green Plains Inc., the world's second-largest owner of ethanol production plants. Green Plains Partners is a play on soaring export demand for grain-based ethanol to blend with gasoline in energy-hungry foreign markets, including China, India and Brazil. Stifel projects Green Plains Partners' annual payout to investors to rise from $1.82 per share in 2017 to $1.98 in 2018 and $2.09 in 2019.

Some years, it hardly seems to matter whether you invest in growth or value strategies – all stocks move up together, or all stocks move down together. But in 2017, strategy has mattered in a big way. Mutual funds that invest in large, undervalued companies have returned a respectable 10.8% year-to-date on average. But funds that invest in large, growing companies have returned a whopping 24.4%.

It’s an impressive performance gap, but it’s likely not a sustainable one. That’s because much of the gains in large-cap growth funds can be attributed to the five stocks that make up the “FAANG” acronym: Facebook (FB), Amazon.com (AMZN), Apple (AAPL), Netflix (NFLX) and Google parent Alphabet (GOOGL). After posting heroic average returns of 48.2% so far this year, those stocks now trade at a whopping 58.7 times next year’s earnings estimates, on average. It’s hard to picture them delivering another bang-up year from such high valuations.

Instead, we suggest investors refocus their attention on bargain-hunting. We’ve profiled the five top-performing no-load mutual funds that invest in large, undervalued shares, as ranked by five-year performance. Each fund boasts stellar management and a solid long-term track record.

If the market wakes up one morning and decides it’s no longer in love with growth, these five value funds should benefit.

em>Data is as of Nov. 17, 2017, unless otherwise noted. Funds listed in alphabetical order. Click on ticker-symbol links in each slide for current share prices and more.

• Expense ratio: 1.05%
• 1-year return: 15.6%
• 5-year annualized return: 16.6%

At Boston Partners All-Cap Value Fund (BPAVX, $26.48), manager Duilio Ramallo has a big ocean to select stocks from – the fund may invest in American and foreign companies of all sizes. But mainly, BPAVX sticks to large U.S. firms – at last report, 66% of assets was invested in large companies, and 88% was invested in U.S. stocks.

Ramallo’s aim is to identify shares of companies that exhibit three characteristics: an attractive valuation, strong business fundamentals and catalysts for change or positive business momentum.

The fund’s two largest sector allocations at the moment are financial stocks, at 30.1% of assets, and technology shares (25.7%). The latter is an unusual focus for value investors – the average large-cap value fund holds just a 12% allocation to tech stocks – since tech generally is considered more the domain of growth investors. Top holdings include the likes of JPMorgan Chase (JPM), Citigroup (C) and Cisco Systems (CSCO).

The fund is a long-term winner, too, with an 11.9% annualized return over the past 15 years that has beaten 99% of peer large-cap value funds.

• Expense ratio: 0.52%
• 1-year return: 15.3%
• 5-year annualized return: 16.8%

Dodge & Cox is known for its deep-dive approach to investing, and that approach has served investors well at Dodge & Cox Stock Fund (DODGX, $201.09).

Bryan Cameron, director of research for the fund company, explains that analysts start their research process with publicly available information, then talk to clients, customers, competitors and suppliers, and finally meet with a company’s management before recommending an investment for the fund. Analysts and managers seldom leave the firm, which means over time the investing team gathers a deep, accumulated knowledge base of the companies it follows. In recent years, the fund’s typical holding period for a stock position has been more than five years.

In today’s market, Cameron says, the team has to look beyond bargain-basement stocks to build a well-rounded portfolio. They are finding some opportunities among financial stocks (DODGX’s largest sector holding, at 27.2% of assets), which still are feeling the pain of low interest rates, and among certain energy stocks (7.8%) that they feel will be well-positioned should energy prices rebound.

An added benefit of this Kip 25 member: The fund’s expense ratio is roughly half that of the average large-cap value fund.

• Expense ratio: 0.62%
• 1-year return: 19.3%
• 5-year annualized return: 16.1%

The Homestead Funds have an unusual origin story. The fund company was launched in 1990 to manage funds on behalf of a co-op of locally owned rural electric providers, say Homestead Value Fund (HOVLX, $54.86) co-managers Mark Ashton and Prabha Carpenter, in jointly emailed comments. “We’re a small team that had to find a way to invest prudently but opportunistically to grow the savings of employees of these rural electric co-ops,” the pair says. That original mandate still translates into a focus on avoiding losses.

Another quirk of the fund, as the managers say, is that it is “sector- and industry-agnostic.” Instead of chasing certain sectors or industries, management will follow “a particular idea until we find the investment angle that fits our risk-averse style.” For example, if they are looking for opportunities related to the growth of e-commerce, instead of only looking at retailers, they might also consider trucking companies. At the moment, the fund is heaviest in technology (21.4%), healthcare (17.2%) and financials (16.6%).

Finally, instead of mainly focusing on a stock’s cheapness, they take a more holistic approach – evaluating, for example, a firm’s managers and considering whether there might be a catalyst for growth in a specific business segment.

That approach has served investors well. Homestead Value Fund’s 9.8% annualized return over the past 15 years is better than 85% of peer funds.

• Expense ratio: 0.91%
• 1-year return: 19.3%
• 5-year annualized return: 16.1%
• Sound Shore Fund’s (SSHFX, $49.92) management team follows a disciplined, bottom-up stock-picking process, says John DeGulis, who has been a co-manager on the fund since 2003. The team first screens for U.S. stocks and ADRs trading for low price-to-earnings ratios, then runs an additional “value check” – looking at a range of valuation ratios to confirm that a prospective investment is, indeed, undervalued. Finally, the team digs in with traditional fundamental research, with one aim being to establish a company’s long- and near-term earnings power.

It’s unusual to find an investment-management shop that offers only one product. Even rarer is to find one that has managed that product well for more than 30 years. Parent company Sound Shore Management launched its eponymous fund in 1985, and the fund’s original managers, Harry Burn and T. Gibbs Kane, still are at the helm.

The team likes “financially sound companies that have underperformed and have lost Wall Street’s attention due to low expectations,” DeGulis says. For example, the fund first invested in Applied Materials (AMAT) – a supplier of equipment and services to the semiconductor industry – in 2010, when the Great Recession still was hanging over the stock. The team concluded Applied Material’s 3D chip technology and other products were going to become big earnings drivers. They were right – the stock has gained more than 300% since the end of that year. SSHFX still holds the position.

Sound Shore has returned 9.8% on average over the past 15 years, beating 85% of its peers. And the company says it has returned 10.2% annualized over the past 30 years through the end of the third quarter, besting the Standard & Poor’s 500-stock index's 9.5% annualized return over the same period.

• Expense ratio: 0.82%
• 1-year return: 17.6%
• 5-year annualized return: 15.9%

Manager Mark Finn has steered T. Rowe Price Value Fund (TRVLX, $38.81) – another Kip 25 fund – since the beginning of 2010. Finn says his goal in the fund is to seek out “high-quality companies facing some kind of controversy that through our work we determine to be temporary or addressable.” The fund also benefits from T. Rowe Price’s deep stock-research bench.

Although it held 117 individual stock positions as of last report – hardly making for a concentrated portfolio – Finn also isn’t afraid to load up the portfolio with big stakes in high-conviction names. He says much of the fund’s outperformance over time has come from those high-conviction picks.

Today, Finn says he’s seeing opportunities primarily in four areas: retail, media, energy and telecommunications. He likes Walmart (WMT), which he says “has the best chance of competing directly with Amazon” given its distribution capabilities and investments in e-commerce. Given ongoing disruption in the media industry, Finn says companies that offer “must-have” programming should fare best. He favors Twenty-First Century Fox (FOXA) for its “loyal following in sports and news.” Among energy companies, he likes EOG Resources (EOG), a shale producer that tends to operate more efficiently than industry peers. Lastly, Finn sees risk in the telecom sector, in part due to “intense price competition in their wireless business,” he says. But he’s still betting on Verizon Communications (VZ) and Crown Castle International (CCI), which he says should benefit as wireless technology moves to its fifth-generation, or 5G, iteration.

Most investment professionals will tell you that, although it doesn’t guarantee against loss, diversification is a critical part of reaching your long-range financial goals.

What they all might not agree on, though, is what diversification really means.

The people who come to our office for help think they’re diversified. After all, they have stocks and bonds and mutual funds in their portfolios. They have large caps and small caps, and maybe even something invested in emerging markets or a variable annuity.

In my view, though, that isn’t diversification. Those investments are still all directly correlated to the market.

Think about it: In 2000 and 2008, it didn’t matter what mix you had, if your investments were tied to the market, you lost money. A lot of money.

That old diversification model – where stocks were your risky asset and bonds were supposed to be safer – is based on something called “Modern Portfolio Theory,” developed in 1952. Which means it’s not so modern anymore.

One thing I ask everyone who comes to our workshops is:

“If you went to a cardiologist who said you needed heart surgery, and they were going to do it the same way they did it in the 1950s, what would you do?”

Most people say they would run out the door and get a second opinion.

Unfortunately, the vast majority of the people we’re meeting with are still investing their money the same way it was done in the ’50s, ’60s and ’70s. And we’re in a much different market today than we were then, thanks to the Internet. We’re moving massive amounts of money every day, every hour. The market moves faster — and it’s more volatile. A news item, even a rumor, can have a same-day effect – good or bad.

And yet, only a small percentage of the businesses in the U.S. economy are publicly traded. According to a 2016 note from JPMorgan Asset Management, the number of publicly listed companies is down by almost half from its peak of 8,025 in 1996. That means there are a lot of private companies out there you can’t buy stock in. (Uber and Ikea, for example.)

That’s a huge thing for people to grasp – that all their hard-earned retirement dollars are invested in a very small segment of our economy. They think because they have mutual funds they have their bases covered. (Even if they don’t really know what’s in those funds.)

Some more history: It used to be, way back when, mutual fund companies didn’t exist in the United States. Most people had savings accounts, because securities were just too expensive for the average person. Then Massachusetts Investors Trust was incorporated in 1924, attracting investors who liked the idea of pooling their money with others to get in on what Wall Street had going.

After the market crashed in 1929, government and industry leaders came up with regulatory safeguards to restore investor confidence, which resulted in the Investment Company Act of 1940, requiring companies to make regular reports to shareholders about a fund's financial status, portfolio holdings and compensation.

But there are still hidden fees in mutual funds that people tell us they weren’t aware of. They may know the expense ratio, which the fund reports, but not the other fees and transaction costs that sometimes make funds twice as expensive as they thought. Not to mention that mutual funds are sometimes tax inefficient: If yours pays dividends, whether you get the money or not, you have to pay taxes. So even when the market is up, you may not be making as much on those investments as you think.

I prefer a truly modern method of portfolio building called asset-class diversification, where you have at least three separate buckets of money that work differently from one another:

• Stocks: The stock market is a good investment for the long haul, but it should be accessed in a more fee-efficient and transparent way. Working with an independent adviser will give you more purchasing options and, therefore, the ability to build a more diverse portfolio.
• Alternative investments: This is where you’ll branch out a bit, putting money into something that isn’t traded in the market. These investments can include real estate, commodities, private equity, hedge funds and more. Volatility is still a factor, of course, but you can look at risk in a way that’s specific to your investment, instead of the overall market. And if the market goes down, these investments won’t necessarily be affected.
• Contractually guaranteed income: Here, you’re creating income you can’t outlive. A life insurance policy or annuity, for example, also may help with long-term care costs. Or you can use an annuity to create your own pension if your employer didn’t offer one. These assets are contractually guaranteed to make a portion of the upside of the market and not lose when the market goes down.

Times have changed, and investors need to change, too. Talk to your financial professional about modernizing your portfolio. Sit down and go over what you have, then discuss what could change to further diversify your holdings. And be sure to talk about what risks and rewards are involved.

If your current planner pushes back and wants to stick with his or her old-school plan, remember: Doctors aren’t the only ones who offer second opinions. It might be time to find a new, forward-thinking adviser.

The article and opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your accountant, tax, or legal adviser with regard to your individual situation.

Securities offered only by duly registered individuals through Madison Avenue Securities, LLC (MAS), Member FINRA & SIPC. Advisory services offered only by duly registered individuals through Brighter Financial Capital Management, LLC, a SEC Investment Advisor. Insurance products and services are offered through Clark & Associates, Inc. Financial Solutions, an affiliated company. Brighter Financial Capital Management, LLC and MAS are separate entities, independently owned.

Alternative Investment Funds represent speculative investments and involve a high degree of risk. An investor could lose all or a substantial portion of his/her investment. Investors must have the financial ability, sophistication/experience and willingness to bear the risks of an investment in an Alternative Investment Fund. Any investment in Alternative Investment Funds should be discretionary capital set aside strictly for speculative purposes. Alternative Investment Fund offering documents are not reviewed or approved by federal or state regulators. Some Alternative Investment Funds may have little or no operating history or performance and may use hypothetical or pro forma performance which may not reflect actual trading done by the manager or adviser and should be reviewed carefully. Investors should not place undue reliance on hypothetical or pro forma performance.

Annuity and insurance contracts contain exclusions, limitations, reductions of benefits and terms for keeping them in force. Investors should consider the contract and the underlying portfolios' investment objectives, risks, and charges and expenses carefully before investing. Please read the annuity prospectus for more complete information, including all charges and expenses before investing or sending money.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

If you’re looking for a core group of ETFs that you can buy and hold through many years of retirement, check out the following five Vanguard funds. Two are bond ETFs that should provide some insurance against a stock market crash, along with a bit of income on the side. A third pick covers a broad swath of the U.S. stock market, and a fourth does the same for overseas bourses, offering potential for long-term growth. Our fifth ETF focuses on real estate investment trusts—a compelling way to generate above-average yields in an era of ultralow interest rates.

The amount you should invest in each of these ETFs depends on your income needs and other personal factors. Based on the asset allocation in the Vanguard target-date fund designed for investors who retired in 2015, it would be reasonable for recent retirees to hold 46% of their assets in stocks and 54% in bonds. Some advisers recommend much higher percentages of stocks, though, upward of 65% if you can tolerate potentially steeper short-term losses in return for higher long-term growth in your portfolio.

Whatever mix you choose, you won’t pay much in annual fees with these funds, which are among the cheapest on the planet. For example, annual expenses for one of our picks, Vanguard Total Stock Market (symbol VTI), amount to just 0.05% per year, or $5 per $10,000 invested. Many stock ETFs charge considerably more—upward of 0.50% a year—making Total Stock a bargain.

Over time, paying less for ETFs can add up to substantially higher investment gains. None of these ETFs distribute much capital gains, moreover, making them good choices for well-heeled retirees investing in a taxable account.

Our picks are listed in alphabetical order. Returns are as of October 21; 3-year returns are annualized.

• Symbol: VCIT
• Yield: 2.7%
• Expense ratio: 0.10%
• 1-year return: 7.2%
• 3-year return: 5.6%

Holding about 1,800 corporate bonds, Intermediate-Term Corporate sticks with high-quality debt issued by companies such as Apple (AAPL), JP Morgan Chase (JPM) and Verizon Communications (VZ). These are huge companies with reliable revenues and sturdy finances, making them unlikely to default on their bonds. In fact, the fund doesn’t hold any debt rated less than triple-B, the lowest investment-grade rating.

With a 2.7% yield, this ETF pays more than Vanguard Total Bond. But it doesn’t pose much more interest rate risk. If rates were to climb by one percentage point, the fund’s share price would decline by about 6.5%, similar to the losses Total Bond would incur in that scenario. If you don’t need the income, stash this ETF in an individual retirement account or another type of tax-deferred vehicle.

Granted, the ETF hasn’t been tested in a market meltdown. It launched in November 2009, well after the 2007-09 bear market ended. Since then, it has returned an annualized 6.4%. But it may not hold up well if the corporate bond market seizes up and fixed-income investors dump everything except Treasuries.

• SEE ALSO: 25 Great No-Load Mutual Funds

• Symbol: VNQ
• Yield: 3.8%
• Expense ratio: 0.12%
• 1-year return: 7.6%
• 3-year return: 10.7%

REIT Index is a solid choice for retirees who want a steady investment paycheck. The ETF holds about 150 property-owning real estate investment trusts. These firms own such things as apartment complexes, hotels, malls, offices and warehouses. Profits come from rents, and investors reap most of that income (after operating expenses). The Internal Revenue Service requires REITs to shell out at least 90% of their taxable income as dividends, creating steady income for shareholders.

With its 3.8% yield, the ETF pays out at a much higher rate than the 2.2% yield of Standard & Poor’s 500-stock index. REITs also yield more than investment-grade bonds. And unlike bonds, which pay a fixed rate of interest, REIT payouts should keep rising as firms raise rents and acquire or develop more properties.

The downside to REITs is their sensitivity to interest rates. Property-owning firms tend to issue a lot of debt and would face higher financing costs if long-term rates were to climb. Already, the prospect of higher rates appears to have hurt this ETF, which has slumped 7.6% in the past three months.

Still, REITs have rebounded from rate increases in the past. The last time the Fed raised rates steadily, between June 2004 and June 2006, REITs returned a cumulative 57.9%, beating the S&P 500 by 42 percentage points, according to Cohen & Steers, an investment firm that specializes in REITs. Strong job growth and an expanding economy enabled landlords to raise rents back then, pushing up REIT payouts. If rates were to rise today because of another stretch of strong economic growth, REITs should be able to raise rents again, pushing up payouts and luring investors back to their fold.

One note about taxes: REITs mainly distribute income that isn’t eligible for the 15% tax rate on “qualified dividends.” If you’re in a high tax bracket, try to own this ETF in a retirement account to hold down the tax drag.

• Symbol: BND
• Yield: 1.9%
• Expense ratio: 0.06%
• 1-year return: 4.5%
• 3-year return: 3.7%

Yielding just 1.9%, Total Bond Market won’t be a ticket to retirement riches. Plenty of other investments pay out at higher rates. So why own this ETF? Because it’s one of the best ways to buy insurance against a stock market crash.

With about two-thirds of its assets in Treasury bonds and other debt backed by Uncle Sam, and the remainder in high-quality corporate bonds, the ETF should be a bulwark against a selloff in stocks. In 2008, when the S&P 500 tumbled 37%, the fund posted a total return of 7.7% (including interest payments). In the case of another stock market panic, this fund should produce positive returns and keep your total portfolio from suffering heavy losses.

One big drawback to this ETF is that it won’t fare well if interest rates jump. Based on the maturities of its underlying bonds, its share price would decline by about 6% if market rates were to rise by one percentage point. Over time, investors would pocket higher interest payments in that scenario. But it could take a few years to get back in the black.

For now, though, we see scant signs that rates will increase sharply. The Federal Reserve has signaled that it plans to increase short-term rates at a glacial pace. Long-term rates, which are set by investors in the bond market, may not edge up much either. Bear in mind, too, that higher rates would likely coincide with strength in the economy, which should lift stocks. If you own a balanced investment mix, this ETF’s modest price declines should be more than offset by gains in the stock market.

• SEE ALSO: Best Vanguard Funds for Retirement Income

• Symbol: VXUS
• Yield: 2.8%
• Expense ratio: 0.13%
• 1-year return: 2.3%
• 3-year return: -0.8%

Covering the world of stocks outside the U.S., Total International Stock invests in more than 6,000 companies based in Europe, Asia and other parts of the world. Developed-market giants such as Nestlé (NSRGY), Novartis (NVS) and Toyota Motor (TM) make up 84% of its assets, although the ETF also includes about 16% in emerging-market stocks, such as Chinese internet company Tencent Holdings (TCHEY) and Korean giant firm Samsung Electronics (not traded in the U.S.).

Foreign stocks haven’t fared well lately, returning much less than the S&P 500 over the past three years. A stronger dollar has made stocks priced in foreign currencies worth less when converted to greenbacks. Investors have also flocked to the U.S. because its economy has expanded at a faster clip than Europe’s and Japan’s in recent years.

Still, foreign stocks may now get a few tailwinds. Central banks in Europe and Japan are trying to stimulate their economies with ultralow interest rates and other measures. Foreign stocks also look cheaper and yield more than their U.S. counterparts, with developed foreign markets yielding an average of 3.3%, well above the S&P 500’s yield.

For retirees, this member of the Kiplinger ETF 20 should help diversify a U.S.-centric portfolio. Foreign markets don’t always march in lockstep with the U.S. Plus, you can get more exposure to fast-growing economies in Asia and other parts of the world with this ETF.

The amount you should invest in foreign stocks depends on your appetite for risk and other investments in your portfolio. Based on the asset mix of the Vanguard Target Retirement 2015 Fund (VTXVX)—suitable for people who recently retired—investors could justify holding about 20% of their portfolio in Total International Stock or its mutual fund equivalent, Vanguard Total International Stock Index Fund (VTIAX).

• Symbol: VTI
• Yield: 2.0%
• Expense ratio: 0.05%
• 1-year return: 8.0%
• 3-year return: 8.6%

Growth and value stocks dip in and out of favor. Invest in Total Stock Market, however, and you won’t have to guess which style will take the lead. Another member of the Kiplinger ETF 20, the fund holds more than 3,600 stocks, aiming to capture the performance of the entire domestic market, including growth and value stocks and everything in between.

Ranking stocks by market value, the ETF places the most emphasis on large and megacap companies, such as Apple, ExxonMobil (XOM) and General Electric (GE). Big companies account for 71% of its assets. But it also holds about 19% in mid-cap stocks and 6.7% in small caps. It even holds a smidgen in micro-cap stocks, such as Jaguar Animal Health (JAGX), a firm with a market value of only $10.8 million that is working on a treatment for ulcers in horses.

• SEE ALSO: Great Stocks to Buy While They Are Cheap

That nod toward smaller companies makes the fund slightly riskier than an ETF tracking the S&P 500. But it should be a risk worth taking. Over the past 15 years, the fund has returned 7.5% annualized, compared with an average of 6.8% per year for the S&P 500.

One other benefit for retirees: The fund hasn’t made capital gains distributions in years and is unlikely to do so, making it a tax-efficient way to access the stock market, especially if you’re in a high income bracket.

Donald Trump's election as president has fueled a powerful stock-market rally rooted in expectations of faster economic growth in 2017. And with faster growth is likely to come higher interest rates.

Long-term bond yields have already surged, and the Federal Reserve is likely to raise its benchmark short-term interest rate by 0.25 percentage point on December 14. That would be the first hike in 12 months. Many economists believe the Fed will boost rates twice more in 2017.

And although rising rates are bad news for some businesses, they're a boon for others—particularly banks: When the Fed raises its rate, nearly all banks immediately raise their prime lending rate, the rate (now 3.5%) that banks charge their most creditworthy customers, by the same amount. But they're far slower to lift what they pay on deposits, so they earn a wider "spread" between the rates at which they lend and the rates they pay depositors.

Banks also could gain from Trump's promise to ease financial regulation. And if the economy improves—still a big “if”—so could demand for loans, and credit quality in general.

We went hunting for banks and other companies that could benefit from rising rates and chose eight standouts.

Stocks are listed alphabetically. Prices and related figures are as of December 6. Price-earnings ratios are based on estimated earnings over the next four quarters. Average of analysts’ earnings estimates are from Zacks Research System.

• Symbol: BAC
• Share price: $22.16
• Market capitalization: $224 billion
• Price-earnings ratio: 14
• Dividend yield: 1.3%
• The business: With $2.2 trillion in assets, Bank of America is the nation's second-biggest bank, behind JPMorgan Chase (JPM). BofA has spent the past seven years rebuilding from its near-death experience during the financial crisis, when it was saved by a government capital injection (since repaid). Thanks to rising deposits, modest loan growth and an ongoing cost-cutting program, the bank is expected to earn roughly $16 billion, or $1.47 per share, in 2016, its best profit since 2007.
• Why rising interest rates will help: As with most banks, BofA's earnings have been held back by the Fed’s decision to keep short-term interest rates at extraordinarily low levels since the financial crisis. The Fed's expected 0.25-percentage-point rate hike this month, perhaps followed by more in 2017 and 2018, will provide a strong tailwind for BofA: The bank calculates that a one-percentage-point rise in short- and long-term rates would boost its net interest income by $5.3 billion over the following 12 months. To put that sum in perspective, it would have lifted BofA's total 2015 net interest income by 13.5%. And if tax cuts and deregulation stoke the U.S. economy in 2017, fueling new bank loan demand, that could further drive earnings.
• Stock valuation: All banks should benefit from higher rates. But brokerage Keefe, Bruyette & Woods says it expects BofA to have "the best earnings trajectory of its peers," thanks to a business mix that includes domestic lending, money management and exposure to Wall Street via BofA’s ownership of Merrill Lynch. The stock has rallied this fall. But at 14 times the average of analysts’ year-ahead earnings estimates, the valuation, Keefe says, is "still reasonable"—assuming further rate increases and given the potential for heftier dividend growth than at many of its rivals.

• Symbol: BK
• Share price: $47.99
• Market capitalization: $50.7 billion
• Price-earnings ratio: 14
• Dividend yield: 1.6%
• The business: Long before Alexander Hamilton's life became the subject of a blockbuster Broadway musical, the founding father’s business legacy was a hit on Wall Street. Bank of New York Mellon, which he launched in 1784, remains a huge player in finance. But instead of traditional banking, the company mainly provides vital services to other financial firms that control $30.5 trillion in assets. Those services include securities custody, record-keeping and clearing of trades.
• Why rising interest rates will help: Like many banks, Bank of New York Mellon has been hurt as record-low interest rates since 2008 have limited its ability to make money on loans and fixed-income investments. So rising rates will boost that part of its business. But the bigger prize is the potential payoff from the bank’s new focus on efficiency after a long string of pricey acquisitions. CFRA Research figures that Bank of New York Mellon bought about 90 related businesses over the past 10 years (including rival Mellon Financial in 2007). The focus on cost-cutting is now paying off: In the first nine months of 2016, non-interest expenses (such as corporate costs) fell 3% from the same period in 2015. That helped boost net income by 7.7%, even as revenue was flat, at $11.4 billion.
• Stock valuation: With the stock priced at 14 times estimated year-ahead earnings, investors seem wary about the company's growth outlook. But fans say Bank of New York Mellon's long-term appeal lies in its deep client relationships, which Morningstar notes tend to be "sticky"—meaning clients mostly stay put. If the money-management industry continues to grow worldwide, that should mean rising demand for Bank of New York Mellon's services. But investors should note that the company faces a number of risks that are more significant than for other big banks—including the downward pressure on investment-management fees stemming from the dramatic shift in the U.S. out of actively managed funds and into index funds.

• Symbol: BRK-B
• Share price: $161.34
• Market capitalization: $396 billion
• Price-earnings ratio: 20
• Dividend yield: none
• The business: Warren Buffett's company is perhaps America's most diversified conglomerate. It's expected to generate $222 billion in revenue in 2016 from such varied businesses as insurance, railroads, energy, aircraft parts, retailing, candy and furniture. Berkshire also controls a mammoth stock portfolio, including big stakes in Coca-Cola (KO), International Business Machines (IBM), Kraft Heinz (KHC) and Wells Fargo (WFC).
• Why rising interest rates will help: Berkshire's insurance operations, including Geico, stand to earn higher returns on their "float": the cash they take in every day from premiums, then reinvest in interest-paying accounts and securities until needed to pay claims. In 2015, that float was a massive $88 billion. That's one element of the huge amount of cash Buffett likes to keep on hand. As he wrote in Berkshire’s 2015 annual report, "In banking terms, Berkshire is—and always will be—heavily asset-sensitive and will consequently benefit from rising interest rates." What's more, Berkshire's big stakes in bank and other financial stocks mean it wins if they win from higher rates. Besides Wells Fargo, Berkshire owns chunks of American Express (AXP), Bank of America, Goldman Sachs (GS) and U.S. Bancorp (USB). Finally, if rising interest rates are rooted in stronger economic growth, that's another plus for Berkshire’s vast stable of companies.
• Stock valuation: Buffett has long measured Berkshire's success by growth of shareholders' equity, or book value (assets minus liabilities). At September 30, that totaled $109.19 per Berkshire class B share. At the current share price, buyers are paying about 1.5 times book value. Buffett has said he considered Berkshire to be undervalued at 1.2 times book value. So the stock is at a premium to that "bargain" level—but not an outsized premium, given Berkshire's promising long-term growth outlook.

QUIZ: How Well Do You Know Warren Buffett?

• Symbol: COF
• Share price: $87.84
• Market capitalization: $42.4 billion
• Price-earnings ratio: 11
• Dividend yield: 1.8%
• The business: The eighth-biggest U.S. bank by assets, with $313 billion, Capital One is best known for its huge credit card business—and the marketing line "What's in your wallet?" Cards generate about 59% of the bank's profit. But Capital One also has become a major provider of auto and business loans as it has doubled in size since 2007.
• Why rising interest rates will help: Higher market rates should give Capital One more flexibility in raising rates on its credit cards and other loans. That could allay some investors' concerns about the risk of rising bad loans stemming from the company’s fast loan growth rate. In the third quarter, total loans outstanding were up 12% from the year-earlier quarter, to $238 billion. Meanwhile, earnings have been depressed in 2016 in part because, as the bank lent more, it also set aside more money for possible loan losses. Actual loan charge-offs also have risen this year. But Capital One terms that "growth math": The bank allows early on for a weeding-out of bad borrowers, then reaps the benefits of the remaining good borrowers for years afterward.
• Stock valuation: Investor concerns about Capital One's lending risk have depressed the stock relative to earnings, with the shares selling for 11 times estimated year-ahead profits. Colin Plunkett, an analyst at Morningstar, believes Capital One "does not receive the respect it deserves." He notes that, unlike many banks, Capital One remained profitable during the financial crisis. Erik Oja, an analyst at CFRA Research, says small businesses could benefit from Trump administration policies, and that could be a plus for Capital One because many small-business owners use credit cards to finance expansion.

• Symbol: SCHW
• Share price: $39.27
• Market capitalization: $52 billion
• Price-earnings ratio: 26
• Dividend yield: 0.7%
• The business: Since 1971 Schwab has been synonymous with the rise of discount brokerage and low-cost investing in general, a boon for individual investors. The firm also has become a key provider of services to independent financial advisers. Revenue is expected to top $7.5 billion in 2016, up 53% since 2012.
• Why rising interest rates will help: Trading commissions were once Schwab's bread and butter, but they have faded in importance. CFRA Research says Schwab derives 40% of its revenue from interest income, such as by lending to upscale clients via its Schwab Bank. That becomes an even better business as interest rates rise. Likewise, higher rates mean Schwab's money market funds, another parking place for clients' cash, become profitable again; like many fund operators, Schwab has been waiving portfolio management fees for years because short-term rates were so close to 0%. On the trading side, Schwab stands to benefit if rising rates cause more investors and advisers to adjust their portfolios—by, for example, selling bonds and buying stocks.
• Stock valuation: At 26 times estimated earnings, the stock isn't cheap. But Schwab’s fans say the franchise has tremendous value and has considerable appeal for investors who can take a long-term view. Morningstar estimates that Schwab's operating income should nearly double over the next five years, as an aging population demands more financial help. Given Schwab's "massive scale," Morningstar says, it is "one of the only companies that can make online advisory for the masses profitable."

• Symbol: GS
• Share price: $231.38
• Market capitalization: $97 billion
• Price-earnings ratio: 13
• Dividend yield: 1.1%
• The business: Goldman Sachs is both praised and vilified for its role as perhaps Wall Street's savviest player. It is a leader in providing financial advice to corporations (such as on merger deals), underwriting of stocks and bonds, asset management, trading, and lending. But it's a much smaller enterprise than before the financial crisis: Estimated 2016 revenue of $30.1 billion compares with $46 billion in 2007.
• Why rising interest rates will help: Like all lenders, Goldman should get a boost if the Federal Reserve pushes short-term rates up further and long-term rates follow. Looking to cash in, Goldman in October launched Marcus, a new online consumer lending business. Higher interest earnings would complement the rising income Goldman earns from its growing asset- management business. But a sustained upturn in interest rates would benefit Goldman in other ways as well. Analyst David Konrad at brokerage Macquarie Capital says that higher rates stemming from a faster-growing U.S. economy would boost merger activity and new corporate stock issuance—two big businesses for Goldman. Overall, the breadth of Goldman's expertise means it has "more earnings levers [to pull] than peers," Konrad says.
• Stock valuation: Goldman's shares have surged 66% since late June, lifting the price higher than it was in mid 2015 and pushing up the year-ahead price-earnings ratio to 13. A relatively low P/E is appropriate given the potential volatility of Goldman's earnings. Still, brokerage Keefe, Bruyette & Woods thinks the price is "still reasonable" as a way to bet on a raft of new business for Goldman in a stronger economy.

• Symbol: PAYX
• Share price: $58.67
• Market capitalization: $21 billion
• Price-earnings ratio: 26
• Dividend yield: 3.1%
• The business: Paychex provides a host of services to 605,000 small and midsize businesses nationwide. The firm, founded in 1971, is best known for handling companies' payrolls. It also provides human-resources services, such as administration of employee benefits. Revenue and earnings both reached record highs in the fiscal year that ended last May 31, at $2.95 billion and $757 million ($2.09 per share), respectively.
• Why rising interest rates will help: Paychex charges fees for its services, but it also makes money another way: by earning interest on the "float," the cash it receives from clients ahead of when Paychex must make disbursements. Morningstar calculates that a one-percentage-point increase in interest rates would boost Paychex's annual earnings by 3%. So higher rates should be a "significant tailwind" over time for Paychex's bottom line, Morningstar says. Another consideration: Paychex stands to benefit if President-elect Trump's promise to deregulate the economy and cut taxes results in a surge in small-business start-ups and expansions.
• Stock valuation: Paychex's steady growth has helped the stock double since 2012—and has also kept it pricey, at 26 times estimated year-ahead earnings. Charles Carlson, head of money manager Horizon Investment Services, in Hammond, Ind., has owned the stock for years. "It's not cheap," he says, but part of the appeal is Paychex's 3.1% dividend yield, which Carlson calls "a nice kicker."

• Symbol: USB
• Share price: $50.73
• Market capitalization: $86 billion
• Price-earnings ratio: 15
• Dividend yield: 2.2%
• The business: U.S. Bancorp, with $454 billion in assets, is the nation’s largest regional bank, meaning those apart from the four big national banks—JPMorgan Chase, Bank of America, Citigroup (C) and Wells Fargo. It operates in 25 western and midwestern states.
• Why rising interest rates will help: U.S. Bancorp has long been a classic "steady as she goes" bank. Thanks to conservative lending practices, the company managed to avoid the disasters that befell many of its peers during the financial crisis. U.S. Bancorp’s loan losses never exceeded 2.4% of its total portfolio, half the rate of many other banks. Still, the long period of rock-bottom interest rates sapped U.S. Bancorp's earnings power. It was able to compensate somewhat with strong fee income from other businesses, such as investment management and retailer payment-processing. Even so, annual earnings have been little changed since 2012. Rising interest rates would help fix that. CFRA Research expects U.S. Bancorp's net interest income to jump 7.2% in 2017; from 2013 through 2015, growth in interest income averaged just 1% annually.
• Stock valuation: U.S. Bancorp’s stock began to rally in late June, when Treasury bond yields bottomed. The advance accelerated with Trump’s victory and growing expectations for stronger economic growth in 2017. With the stock priced at 15 times estimated earnings, it may be fairly valued in the short run. But any pullback could be a great opportunity for investors looking for a strong domestic bank that is committed to rewarding shareholders by raising dividends and buying back shares. Buyers would be in good company: Warren Buffett's Berkshire Hathaway owns nearly 6% of U.S. Bancorp’s shares.

What is a value stock, really? “I know it when I see it,” says Robert Waid, who heads up the index business at investment consulting firm Wilshire Associates. “It’s like the difference between pornography and art.”

All kidding aside, Waid admits that determining what constitutes a bargain stock—and its counterpart, a growth stock—is complicated. In simplest terms, a value stock is one that is cheap in relation to such basic measures of corporate performance as earnings, sales, book value and cash flow. Examples of what are commonly viewed as value stocks are Citicorp (C), ExxonMobil (XOM)and JPMorgan Chase (JPM). Growth companies, by contrast, boast rapidly expanding profits and revenues, and their stocks typically command high valuations. Think Amazon.com (AMZN) and Facebook (FB).

Several firms, including Wilshire and S&P Dow Jones Indices, maintain indexes that divide the stock market into growth and value segments. They do so by ranking stocks on a variety of factors, such as profit and sales growth, price-earnings ratios, and so on. Financial and energy stocks tend to fall in the value camp; technology and health care land in the growth group./p>

But there’s plenty of room for interpretation. Are Alphabet (GOOGL) (the former Google) and Microsoft (MSFT) growth stocks or value stocks? Apparently, they are both. Dodge & Cox Stock (DODGX), a classic value fund, and Harbor Capital Appreciation (HACAX), which focuses on fast growers, own both stocks.

As once-small firms turn into behemoths, growth companies often turn into value stocks. That was certainly the case with such former technology luminaries as Cisco Systems, EMC and Intel. And that may be happening today with Apple (AAPL) and biotech giant Gilead Sciences (GILD). At its June 30 close of $96, Apple was selling for 11 times estimated year-ahead earnings, and Gilead, at $83, was trading for a seemingly absurd 7 times forecast profits. The overall U.S. stock market sells for 17 times estimated earnings. And although earnings growth at both companies has stalled, index sponsors for the most part still consider both firms to be growth stocks.

Preferred stocks combine elements of stocks and bonds in one investment. Typically issued at $25 a share, they pay a fixed rate of interest like bonds do. But preferreds trade like stocks and can bounce above or below the issue price. Preferreds tend to pay more than comparable bonds because they’re riskier. An issuer may be able to delay or cut payouts, and if the preferred is “non-cumulative,” the issuer isn’t on the hook to pay missed dividends. Issuers do owe all payments if a preferred is “cumulative,” but yields for these securities tend to be lower.

Earnings for All

• Bank Accounts: 1%-4%
• Municipal Bonds: 1%-3%
• Investment-Grade Bonds: 3%-5%
• Real-Estate Investment Trusts: 2%-6%
• Foreign Bonds: 3%-6%
• Closed-End Funds: 5%-11%
• High-Yield Bonds: 6%-8%
• Master Limited Partnerships: 5%-11%

Risks to your money. Similar to long-term bonds, preferred stocks tend to be sensitive to interest rate moves. Companies may be able to redeem, or “call,” their preferred shares at any time, potentially saddling investors with losses. Preferred stocks, which tumbled during the financial crisis, could dive if investors lose faith in banks and other issuers.

Hire a pro. The exchange-traded iShares U.S. Preferred Stock ETF (PFF, $39, 5.8%), a member of the Kiplinger ETF 20, offers access to hundreds of preferred securities issued by firms such as Allergan, HSBC and Wells Fargo. Banks and other financial firms account for 60% of its assets, though, concentrating most of the fund into one sector. Market Vectors Preferred Securities ex-Financials ETF (PFXF, $20, 6.0%) tracks an index of nonfinancial preferreds.

Do it yourself. With individual securities, stick to financially solid companies and buy shares below or only slightly above their $25 issuance price, says Michael Greco, cofounder of GCI Financial, an investment firm in Mendham, N.J. One preferred he likes: JPMorgan Chase 6.15% Non-Cumulative Preferred Series BB (JPM-PH, $26, 5.9%). Shares can’t be redeemed by JPMorgan until 2020, and dividends are considered to be “qualified,” meaning the maximum federal tax rate on the payments is 15% or 20%. Greco also favors Chesapeake Lodging Trust 7.75% Preferred (CHSP-PA, $26, 7.4%). A real estate investment trust, Chesapeake owns hotel properties such as the Hyatt Regency Boston and should easily cover its dividend payments, says Greco, though they don’t qualify for preferential tax treatment.

Next: Closed-End Funds to Earn 5% - 11%

Fidelity Investments, which has some $1.8 trillion invested in its mutual funds, needs no introduction. But if earning cash from your investment portfolio is a chief goal, it is worth revisiting the behemoth's income-oriented lineup. That's because in recent years, Fidelity's dividend-stock funds have undergone important makeovers and are now more appealing. In other categories, such as bonds and real estate, you have plenty of options, but with short-term interest rates set to rise, some funds are better choices than others.

Here, we list our top picks, including several members from the Kiplinger 25, the roster of our favorite no-load mutual funds. (All returns are as of July 14.)

Stocks Funds

Not long ago, most of Fidelity's income-oriented stock fund offerings paid puny yields, as managers focused less on income and more on total return. But in 2011, the firm overhauled the funds' management teams and ordered them to live up to the promise of delivering cash. "There is a greater focus on yield now," says Katie Reichart, a Morningstar analyst.

Fidelity Growth & Income Portfolio (symbol FGRIX) is one good example. The fund pays out 1.8%, compared with 2.0% for Standard & Poor's 500-stock index. Rather than chasing the highest-yielding stocks, the fund is committed to investing in companies that can increase both earnings and dividends over time—an appealing strategy when interest rates are rising. So today, 22% of the fund is invested in banks, where dividends are still in the early stages of recovery from the financial crisis. Recent top holdings include JPMorgan Chase & Co. (JPM), Citigroup (C) and Bank of America Corp. (BAC). Technology companies make up the next biggest chunk of the fund (21%), which has holdings in cash-rich giants such as Apple (AAPL) and Microsoft (MSFT).

Because manager Matt Fruhan has been at the helm for less than five years, it's impossible to judge Growth & Income's long-term performance. But the fund has landed in the top half of Morningstar's large-blend category (funds that invest in both growth-oriented and undervalued companies) in three out of the past four calendar years, and it has delivered 3.8% year to date, beating the S&P 500 by a hair.

Real Estate Funds

Real estate investment trusts—companies that own or finance apartment buildings, shopping malls and other income-producing properties—tend to offer fat yields. But worries about rising interest rates have hurt the group lately. Higher rates can make it more expensive for REITs to borrow money. Also, investors might be drawn to other options as yields on REITs look less attractive relative to the competition. Since hitting a recent peak in January, the S&P U.S. REIT index, a benchmark of publicly traded REITs in the U.S., has stumbled 9.6%, while the S&P 500 has returned 3.8%.

That makes the performance of Fidelity Real Estate Income (FRIFX), which is yielding 4.4%, all the more remarkable. For the same period, the fund has lost only 1.2%. Manager Mark Snyderman, who has been in charge since 2003, invests in a mix of investments, including REITs, as well as preferred stocks and corporate bonds issued by real estate companies. The fund has about 50% of its holdings in bonds, cash and securities backed by mortgages for commercial properties. The generous payout comes with elevated risk: More than half of the bond holdings have below-investment-grade credit ratings. But Snyderman has proved his ability to pick winners—and minimize losses. In 2008, for example, as the housing bubble burst, Real Estate Income gave up 31.0%, compared with the S&P 500's 37.0% loss.

Investment-Grade Bond Funds

An investment-grade bond fund is the core of any income-oriented portfolio. Here, a top option is Kip 25 member Fidelity Total Bond (FTBFX), yielding 2.9%. Although U.S. Treasuries and investment-grade corporate bonds are the fund's primary holdings, Total Bond can also own riskier fare, such as high-yield bonds and emerging-markets debt. That flexibility is a bonus when interest rates climb, because the fatter yields on those higher-risk investments help offset price declines (bond prices move in the opposite direction of yields). For example, earlier this year lead manager Ford O'Neil increased Total Bond's stake in high yield (aka junk) bonds to 18%—close to the maximum 20% that the fund's mandate allows—capitalizing on a sell-off in the category in late 2014. Such bargain hunting is "how he drives returns," says Christine Thompson, chief investment officer of Fidelity's fixed income group.

The fund has delivered consistently good results. Over the past 10 years, Total Bond has gained 5.0% annualized, beating the Barclays Capital U.S. Aggregate Bond index (a benchmark of investment-grade U.S. debt) by half of a percentage point. It has performed better than more than half of similar funds in seven of the 10 years through 2014. What's more, the fund has delivered those returns with less risk than the average intermediate-term bond fund.

Investors in high tax brackets should consider Fidelity Intermediate Municipal Income (FLTMX). The fund’s 1.6% tax-free yield is the same as 2.8% from a taxable investment for someone who faces the top federal rate of 43.4% (with $464,850 or more of taxable income for married taxpayers). The fund, also on the Kip 25 list, invests in muni bonds across the nation so, depending on where you live, part of the interest may escape state income taxes, too.

Intermediate Municipal Income rarely boasts the highest income distribution among its peers. That's because lead manager Mark Sommer prefers to stick to bonds with high credit ratings and, therefore, somewhat lower yields. But in turn you can expect a smoother ride from the fund. For example, it keeps 59% of its holdings in bonds rated double-A or better, compared with 25% for the average national muni bond fund, and it doesn't own any munis from Puerto Rico, which is now struggling to repay its debt. The fund's 10-year, annualized return is 3.9% (compared with 3.6% for its peers).

High-Yielding Bond Funds

With the Federal Reserve poised to raise short-term interest rates, bond investors have been bracing for potential losses. One way to protect against rate hikes while still earning a decent payout is with Fidelity Floating Rate High Income (FFRHX), sporting a 3.7% yield. The fund invests in loans that banks make to companies with low credit ratings. Rates on these loans are tied to a short-term benchmark and typically reset every 30 to 90 days, making the loans a good buffer against rising interest rates. The downside is that because the loans are issued to riskier companies and the bank-loan universe is relatively small, losses can quickly multiply when the market stumbles. As a result, you don't want to make big bets on the highest-yielding, lowest-quality bank loans. Since Eric Mollenhauer took over as manager of Floating Rate High Income in 2013, the fund's exposure to lower-tier loans has ticked up a few notches. Even so, it's still a conservative choice. Loans with a double-B rating, the top credit tier within so-called junk bonds, make up 45% of the fund, compared with only 31% for the average bank loan fund.

For an even bigger payout, consider another Kip 25 member, Fidelity New Markets Income (FNMIX), which is delivering a sizable yield of 5.1%. The fund buys debt issued in more than 50 countries, the majority of which are emerging markets. These bonds often receive below-investment-grade credit ratings, which accounts for the fund's generous yield.

Experience makes all the difference in such a dicey area. Manager John Carlson has been in charge since June 1995, and since then the fund has delivered annualized returns of 11.9% (versus 10.2% for the average emerging-markets bond fund). The fund has landed in the top third of its category in eight of the past 10 calendar years, including so far in 2015. Carlson favors bonds that are denominated in dollars, which protects against volatile swings in local currencies. He has also built big positions in Venezuela and Russia, two oil-exporting countries where falling energy prices have pushed up yields. Carlson believes the countries can still make good on their debt—and, over the years, he has often been proved right.