6 Top ETF Picks For Investment Success In Choppy Times
By APARNA NARAYANAN09/15/2015 06:52 PM ET. Best ETFs 2015: September Performance Update
When the bears are everywhere, smart investors use the opportunity to take stock of their ETF portfolio, add to their watch lists and take a deeper dive into how top ETFs are performing.
Extremely high stock volatility took a toll on SPDR S&P 500 (ARCA:SPY), an ETF proxy for the broad U.S. stock market. It tumbled more than 6% in the past month.
The pain was broad across sectors, regions and asset classes.
Vanguard FTSE Emerging Markets (ARCA:VWO) and iShares MSCI EAFE (ARCA:EFA), tracking international developed markets, plunged nearly 8% each.
Market Vectors Pharmaceutical (ARCA:PPH), holding large-cap stocks in a highflying industry, was knocked back 8% too.
Even ETFs holding haven assets pegged losses.
SPDR Gold Shares (ARCA:GLD) eased 0.6% in the past month. However, Vanguard Total
Bond Market (ARCA:BND) eked out a 0.1% gain.
Amid the carnage, alternative investments buoyed ETF investment portfolios. IQ Hedge Multi-Strategy Tracker (ARCA:QAI) fell “only” 0.1% in the past month. The ETF is a volatility dampener, Adam Patti, CEO of IndexIQ, told IBD in an interview.
Choppiness in the stock market today requires investors to think creatively. Solutions to the vexing decline in many portfolios could come from nontraditional asset classes or the fixed- income world.
Two ETF investing experts discuss their top picks for successful investing in the months ahead.
• Dean Zayed, CEO of Brookstone Capital Management in Wheaton, Ill.; $1.7 billion in assets under management:
On a relative basis, international equities look more attractive than that of their domestic counterparts.
In order to execute and capitalize on the growing trends overseas, we would recommend the following ETFs to gain prudent exposure.
IShares MSCI EAFE Small Cap (ARCA:SCZ). Higher beta stocks profit more from central bank stimulus — as seen in U.S. small caps from 2009 until the present.
IShares MSCI EAFE (ARCA:EFA) or PowerShares International Dividend
Achievers (ARCA:PID) . EFA provides direct exposure to the valuation discrepancy between U.S. and international equities. However, until consumer spending materializes in the region, investors can be paid to wait with PID — its holdings’ solid yields and strong balance sheets have withstood the crisis of 2011 and still maintain their dividend policies today.
(PID yields 3.59%.)
WisdomTree Japan Hedged Equity (ARCA:DXJ). Earnings growth in Japan has increased approximately 10% year over year and consumer spending is at decade highs. But central bank policy will depreciate the yen and thus the exposure must be hedged.
• Megan Petruska, director of portfolio research and advisory for Pittsburgh-based McMahon Financial Advisors; $180 million in AUM:
PowerShares International Dividend Achievers (ARCA:PID). This ETF helps to diversify your portfolio by investing in numerous larger international stocks. Its main advantage is holding stocks that have increased their annual dividends over the past five years. The increase in annual dividends tends to increase the ETF earnings.
Pimco Investment Grade Corporate Bond (ARCA:CORP). This is a beneficial ETF for investors seeking to maximize current income.
Megan Petruska is director of portfolio research and advisory for McMahon Financial Advisors. Dean Zayed is president and CEO of Brookstone Capital… View Enlarged Image
CORP invests 65% in corporate bonds. This provides for a good tool to diversify against the equity risk held within a portfolio and a moderate level of current income.
Megan Petruska is director of portfolio research and advisory for McMahon Financial Advisors. Dean Zayed is president and CEO of Brookstone Capital
Bond ETFs provide the stability of investing in large U.S. corporations, while earning more than government-backed bonds due to their being a riskier investment.
SPDR Barclays Issuer Scored Corporate Bond (ARCA:CBND). Another beneficial ETF for investors seeking to maximize current income through debt issued by large U.S. firms.
CBND seeks to replicate the Barclays Capital Issuer Scored Corporate Index, the same index that measures the U.S. corporate bond market.
The ETF is currently trading not too far from its 52-week high of 35.44, which can be a favorable buy position.