In any market environment, knowing exactly which exchange-traded funds (ETFs) to purchase is not an easy task. Today, knowing the right ETFs to buy has been made even more difficult by the recent uptick in equity market volatility caused various U.S. trade controversies.
But while it is more difficult, there are still plenty of credible options to consider. Plus, it is also becoming easier to identify the funds most vulnerable to the trade wars, presenting investors with a sort of addition by subtraction scenario.
In the current market climate, investors should continue emphasizing portfolio balance while looking for ETFs to buy that increase their portfolio’s diversity, bolster income streams, reduce volatility and, for more tactical investors, take advantage of some recent price retrenchment.
With those factors in mind, here are some of the ETFs to buy over the rest of 2019.
SPDR Portfolio Short Term Corporate Bond ETF
The SPDR Portfolio Short Term Corporate Bond ETF is a cost-effective avenue for investors looking to reduce risk while bolstering their income profiles. SPSB, which holds nearly 1,200 corporate bonds, has a yield of 3.23%, which is better than what investors get with the S&P 500 (.SPX) or 10-year Treasuries.
With the business cycle in its latter stages and the yield curve showing signs of flattening, shorter-duration strategies with enhanced income traits could prove to be solid bets for bond investors. SPSB has an option-adjusted duration of just 1.81 years.
“With a constrained long end and low probability for Fed actions to move the short end, the curve will likely stay flat, residing within the 10-20 basis point range it has traveled in since the Fed went on hold and started preaching patience,” said State Street in a recent note. “In fact, since January, the rolling 50-day moving average 10- to 2-year yield spread has held steady at either 16 or 17 basis points.”
Over 84% of SPSB’s holdings are rated A or Baa.
Invesco S&P 500 Low Volatility ETF
With investors becoming increasingly skittish about riskier assets due to the aforementioned trade flaps, the Invesco S&P 500 Low Volatility ETF makes for a predictable inclusion on this list. Predictable but still potent, because this ETF to buy has recently been making a series of all-time highs.
That means SPLV is accomplishing one of the primary objectives of low volatility strategies: to perform less poorly when broader markets swoon. Indeed, this ETF to buy is living up to the hype. Over the past month, SPLV is up 4.7% while the S&P 500 is up 1.6% over the same period.
SPLV is sector agnostic, meaning the 100 least-volatile stocks over the past year are the fund’s components, regardless of sector residence. That said, some sectors frequently top the least-volatile list, including utilities and real estate.
Those two groups combine for nearly 46% of SPLV’s weight. That is a positive when those sectors are soaring and that they are. On June 6, 13 real estate and utilities ETFs hit record highs.
ProShares S&P 500 Dividend Aristocrats ETF
The ProShares S&P 500 Dividend Aristocrats ETF features a basket of domestic stocks that have boosted their dividends for at least 25 consecutive years and it is that type of quality trait that makes NOBL an ETF to buy and one that holds up better than traditional equity funds. That much was confirmed in May when this ProShares fund was about 100 basis points less bad than the S&P 500, confirming NOBL’s status as a safe ETF to buy, relatively speaking.
Due to its emphasis on dividend growth over yield, NOBL is not heavily allocated to the real estate and utilities sectors. Those groups combine for just 3.5% of the fund’s weight, meaning NOBL can be paired with the aforementioned SPLV in investors’ portfolios. Importantly, NOBL’s strategy can be a winner over longer holding periods, too.
“The S&P 500 aristocrats have a five-year annual return of about 9.9%, compared with 9.8% for the S&P 500. The same performance advantage has held true for consistent mid- and small-cap growers as well,” according to Barron’s.
Investors have added nearly $575 million to NOBL this year. This ETF to buy has a dividend yield of 2.5%, implying ample room for dividend growth going forward.
Invesco S&P SmallCap Information Technology ETF
The Invesco S&P SmallCap Information Technology ETF is a tactical idea for the rest of this year. In less volatile market environments, the combination of small-cap stocks and the technology sector has made PSCT one of the best ETFs to buy. That is not the case at the moment, but investors considering PSCT as an ETF to buy will get better pricing today than they would have at the start of May.
After faltering last month, PSCT is about 12% below its 52-week. That puts the fund in correction territory, not a bear market. But PSCT appears to be supported around $75, giving investors a good price point for where to set stop-loss orders.
PSCT’s 87 holdings are engaged in computer hardware and software, internet, electronics and semiconductors and communication technologies, putting the fund front-and-center when it comes to trade war talk. Bottom line: the best thing that could happen for PSCT over the near-term would be the U.S. and China making nice on trade.
IQ SP High Yield Low Volatility Bond ETF
The IQ SP High Yield Low Volatility Bond ETF is an ETF to buy for investors looking for the yield benefits of junk bonds with a reduced volatility profile. HYLV follows the S&P U.S. High Yield Low Volatility Corporate Bond Index.
That benchmark “is designed to measure the performance of U.S. high yield corporate bonds with potentially low volatility. The index is comprised of bonds from the S&P U.S. High Yield Corporate Bond Index and is a modified market value weighted index with a 3% cap on any single issuer,” according to S&P Dow Jones.
While default rates remain benign, a sudden erosion in economic data would likely sting the high-yield bond market, bringing increased volatility. HYLV can help investors mitigate that turbulence without sacrificing yield, as highlighted by the fund’s 30-day SEC yield of 4.35%.
HYLV keeps volatility to a minimum by eschewing highly speculative CCC-rated debt. Over 85% of the fund’s holdings carry one of the three “BB” ratings.
As of this writing, Todd Shriber did not own any of the aforementioned securities.