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David Dierking

ETF of the Day: PIMCO Enhanced Short Maturity Active ETF (MINT)

With more than 2,000 U.S.-listed ETFs available to investors, it's easy to get confused and overwhelmed with the sheer number of choices. And with so many options, how do you know what's good and what isn't? In this space, I'm going to evaluate and rate a popular ETF to help you make smarter investing decisions.

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Today's ETF is the PIMCO Enhanced Short Maturity Active ETF (MINT).

It was just a couple short years ago that cash was considered trash. The target Fed Funds rate was near 0% and money market funds were yielding next to nothing. Investors began turning to conservative equities in order to generate the yields they weren't finding in fixed income. Fast forward to today, cash is no longer a worthless investment. The Vanguard Prime Money Market Fund (VMMXX), one of the most popular choices in the mutual fund space, is now yielding 2.2% giving investors real options for the cash portion of their portfolio. But if you're willing to take on a hair more risk, you can do even better.

ETF Website: PIMCO Enhanced Short Maturity Active ETF

MINT invests in ultra-short term investment-grade corporate bonds with a remaining maturity of under one year. Default risk in any one individual bond in the portfolio is relatively low, but take into account that MINT holds nearly 900 different securities makes overall credit risk within the portfolio virtually non-existent.

The fund's duration of just 0.34 years is also an important factor considering the Fed is anticipating raising rates multiple times in 2019. MINT's duration, a measure of a security's interest rate sensitivity (a duration of 0.34 means the fund could theoretically be expected to lose 0.34% in value for every 1% increase in interest rates), suggests the fund should be well insulated even in the event of a significant rise in interest rates in the future. In other words, this is one of the safest cash-alternative products you can find.

The dividend yield on MINT is currently at 2.6%, which means you're getting a 0.4% yield premium over one of the top straight money market funds in the industry, with very little additional risk. Keep in mind, many mutual funds, such as VMMXX, require $1000 to $3000 minimum initial investments. An ETF, such as MINT, requires an initial purchase of just one share making them much accessible for many investors.

Recommendation: Consider buying

MINT's closest competitor is the iShares Short Maturity Bond ETF (NEAR). It targets the same ultra-short term investment-grade universe that MINT does and is also actively managed. Choosing between MINT and NEAR is almost a toss-up to me. NEAR's expense ratio of 0.25% is a big improvement over MINT's 0.42%, although MINT has outperformed on a total return basis since inception. If you're investing in equity ETFs, the expense ratio difference may not be huge, but in a segment of the market, such as ultra-safe short-term bonds, where risk is very low and returns are substantially similar, a 0.17% difference in expense ratios makes a difference.

Overall, MINT is a very solid ETF and makes a lot of sense if you're looking for a higher-yielding alternative to cash in your portfolio.

What do you think of MINT? Comment down below!

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