Who doesn’t look forward to getting their paycheck on Friday? SoFi is making that a reality in your fixed income portfolio as well.
The company just announced the launch of the SoFi Weekly Income ETF (TGIF), a fund that focus mostly on shorter-term investment-grade and junk bonds with the intention of paying a weekly dividend to shareholders.
The Fund is an actively-managed ETF that seeks to achieve its investment objective, under normal circumstances, by investing in U.S.-dollar denominated investment grade and non-investment grade fixed income securities and instruments and expects to distribute income from its investments to shareholders weekly. The Fund anticipates making its weekly income distributions each Friday.
The fund plans on holding at least 30 different bonds and aims to keep overall portfolio duration under 3 years.
Overall portfolio risk should be relatively contained given the short-term nature of the fund, but the high yield component should give it a bit of a yield boost as well.
For those wondering about what the yield will be, the fund will manage towards a $0.05 per share dividend every Friday with the possibility for additional payments around year-end. Given its $100/share launch price, that would put the fund’s current yield at around 2.6%.
TGIF’s expense ratio of 0.59% is a little steep, but probably not surprising given the administrative work necessary to keep up with a weekly payment schedule. Is paying an extra 0.5% annually compared to some of the cheapest short-term bond ETFs worth getting a weekly paycheck instead of a monthly one? Obviously, it’s up to the investor but it feels questionable on the surface.
The innovation within the ETF space continues! The weekly dividend will certainly appeal to a cross-section of income seekers, but it’s unclear how many. So many folks work on a monthly income schedule with their portfolios that they’ve probably become accustomed to it. I’m not sure if there’s much of a need for weekly income, but perhaps that will be the case for retirees or those living off of portfolio income.
I just don’t know if the added cost is worth it. If you need/want weekly income, maximizing yield is probably important. The Vanguard Short-Term Corporate Bond ETF (VCSH), a substantially similar fund though without the high yield exposure, costs just 0.05%. Personally, I’d rather have the extra 0.5% yield in my pocket and stick with a monthly pay schedule.