Best ETFs for defensive stocks
Stocks of defensive companies are ones that provide more stability, expert says
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ETFs, or exchange-traded funds, are baskets of securities that trade like stocks on an exchange and promote diversification, which may contribute to lowering risk during downturns in the market.
"A bear market is a prolonged period of stock market price declines, typically by 20 percent or more from its most recent high," Roberta King, a vice president and branch leader at Fidelity Investments, told FOX Business. "In times of a bear market or market instability, a diversified investment portfolio may help minimize your risk."
She explained that ETFs have advantages for long-term investors during a bear market and appealing features like diversification, easy and accessible trading as well as full transparency of holdings each trading day, making it relatively easy to know exactly what you own.
"As bear markets don’t tend to last very long, it’s important to think of your long-term saving strategy and consider creating a diversified portfolio," King said.
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Understanding the investing big picture
According to King, there is no one-size-fits-all approach to investing and there are different factors to consider when building your portfolio.
"Investors should choose the best option for their specific investing needs, keeping their time horizon, risk tolerance, financial circumstance and short- and long-term goals in mind before making any investment decision," said King.
Traders work on the floor of the New York Stock Exchange in New York City. (David L. Nemec/New York Stock Exchange via AP) | Associated Press
What are defensive stocks?
You may want to consider defensive stocks when making investment choices.
"Stocks of defensive companies are ones that provide more stability, often through dividend payments, due to offering relatively steady earnings and cash generation," Todd Rosenbluth, VettiFi's head of research, told FOX Business. "They tend to be more widely found in sectors like consumer staples, health care and utilities that are less sensitive to the economy."
Stocks of defensive companies are ones that provide more stability, often through dividend payments, due to offering relatively steady earnings and cash generation, he noted.
"They tend to be more widely found in sectors like consumer staples, health care and utilities that are less sensitive to the economy," Rosenbluth said.
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Rosenbluth has identified five ETFs that promote defensive stocks:
– Invesco S&P 500 Low Volatility ETF
– iShares Core High Dividend ETF
– SPDR Portfolio S&P 500 High Dividend ETF
– Vanguard Utilities Index Fund
– Consumer Staples Select Sector SPDR Fund
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| SPLV | INVESCO EXCHANGE TRADED FD TR II S&P 500 LOW VOLATILITY ETF | 74.85 | +0.08 | +0.11% |
| HDV | ISHARES TRUST ISHARES CORE HIGH DIVIDEND | 121.28 | +0.18 | +0.15% |
| SPYD | SPDR® PORTFOLIO S&P 500® HIGH DIVIDEND ETF - USD DIS | 47.30 | -0.02 | -0.04% |
| VPU | VANGUARD WORLD FUND VANGUARD UTILITIES ETF | 179.11 | +0.13 | +0.07% |
| XLP | CONSUMER STAPLES SELECT SECTOR SPDR ETF | 83.22 | +0.42 | +0.51% |