Virtus InfraCap U.S. Preferred Stock ETF (PFFA): A Tier Four ETF

Ask most investors about dividend stocks...

They know what you're talking about.

Ask them about bonds...

Most understand those too.

But ask someone about preferred stocks, and you'll often get a puzzled look.

That's understandable.

Preferred stocks don't receive nearly as much attention as common stocks or bonds.

Yet they've quietly become one of my favorite ways to diversify retirement income.

That's exactly why PFFA has earned a place in my Tier Four portfolio.

Key Statistics

• Ticker: PFFA
• Tier: Tier Four
• Investment Style: U.S. Preferred Securities
• Fund Inception: May 15, 2018
• Expense Ratio: 2.18% (including acquired fund fees and the cost of leverage)
• Number of Holdings: Approximately 100
• Underlying Exposure: U.S. preferred securities
• Distribution Frequency: Monthly

PFFA is an actively managed ETF that invests primarily in preferred securities while using modest leverage to enhance income.

Why PFFA Fits Tier Four

Tier Four is designed to enhance the retirement income already built through Tiers One, Two, and Three.

The goal isn't replacing your dividend portfolio.

It's diversifying where your retirement income comes from.

Preferred securities represent an entirely different asset class than the dividend stocks featured in my 50 DGI Crab stocks.

That's exactly why they belong here.

They provide another dependable source of cash flow that behaves differently than common stocks, REITs, bonds, MLPs, or covered-call ETFs.

What Does PFFA Own?

PFFA invests primarily in preferred securities issued by large financial institutions, utilities, real estate companies, and other established businesses.

Unlike common stock, preferred shares generally don't participate as much in a company's future growth.

Instead, investors purchase them primarily for the income they generate.

Think of preferred stocks as sitting somewhere between common stock and bonds.

They aren't exactly either one.

They're their own asset class.

Where This Income Comes From

Companies sometimes need to raise capital.

One way they do that is by issuing preferred stock.

Investors who purchase those preferred shares receive regular preferred dividends.

Those payments become the primary source of income for PFFA.

In simple terms...

Companies issue preferred shares. Preferred shareholders receive preferred dividends. PFFA collects those dividends. Investors receive monthly income.

Why I Like PFFA

There aren't any preferred stocks among my 50 DGI Crab stocks.

Why? The answer is simple.

Preferred securities play a different role than common stocks.

Rather than researching individual preferred issues — which can be complicated because companies often have multiple preferred series outstanding — I would much rather own a professionally managed ETF.

PFFA provides broad diversification across the preferred stock market while allowing experienced managers to evaluate new issues, credit quality, and portfolio construction.

That's a much better solution for me.

Who Is This ETF For?

PFFA is ideal for investors who:

• Are building a Tier Four portfolio.
• Want another source of retirement income.
• Prefer professional management of preferred securities.
• Want diversification beyond traditional dividend stocks and bonds.
• Appreciate monthly distributions.

For me, PFFA fills a role that no other ETF in my portfolio can.

Why Preferred Stocks Exist

One of the easiest ways to understand preferred stocks is to think about a company's capital structure.

A company can raise money by:

• Borrowing through bonds.
• Selling common stock.
• Issuing preferred stock.

Preferred stock occupies the middle ground.

It generally offers higher income than common stock.

But unlike common shareholders, preferred investors usually have limited upside if the company grows dramatically.

That's perfectly fine with me.

I don't own PFFA because I'm looking for explosive growth.

I own it because I'm looking for dependable income from another unique asset class.

A Note About Active Management

PFFA is one of the few ETFs in my portfolio where I actually view active management as a significant advantage.

The preferred stock market is much more specialized than the common stock market.

New preferred issues come to market regularly.

Credit quality changes.

Interest rates affect valuations.

Having experienced managers navigate that landscape is a benefit rather than a drawback in my opinion.

Final Thoughts from the DGI Crab

PFFA introduces something my retirement portfolio wouldn't otherwise have.

Preferred securities. Monthly income. Professional management. And another dependable income engine that behaves differently than every other asset class I own.

That's exactly what Tier Four is designed to accomplish.

If I had to summarize PFFA in one sentence, it would be this:

Generate retirement income from an often-overlooked asset class: preferred securities.

That's exactly why PFFA has earned its place as one of my favorite Tier Four ETFs.

DGI Crab Summary

Role in the Portfolio: Diversify retirement income through preferred securities.

Where This Income Comes From: Preferred dividends paid by companies that have issued preferred stock.

Should This Replace My Tier Three Holdings? No. Tier Four is designed to enhance the dependable dividend income you've already built in Tiers One through Three. The exception is investors beginning their investing journey later in life, where building around high-quality income ETFs and reinvesting distributions through DRIP can be a practical way to grow retirement income.