The broad U.S. market is hitting new all-time highs and the
risk-on trade should be in full force. That is not exactly the
case today, as investors appear to be moving their assets into
sectors that are considered safe and boring.
Sectors such as the consumer staples, utilities, and high
dividend payers are breaking out after lagging the market for a
large portion of the summer. The move is interesting considering
the tech stocks, often viewed as above-average risk, have
reported strong earnings and are also breaking out. This is where
a solid diversification among several sectors becomes critical
for a portfolio.
SPDR Consumer Staples ETF (NYSE:
The ETF is composed of stocks that most consumers use on a
daily basis and will be forced to buy regardless of the economic
climate. The top sectors include food & staples retailing,
household products, and food & beverage. The top holding,
Proctor & Gamble (NYSE:
), makes up 14 percent of the portfolio and has rallied 8 percent
in the last three weeks to move within striking distance of a new
Year-to-date the ETF is up 22 percent and it pays a dividend
yield of 2.6 percent. The annual expense ratio is 0.18
iShares High Dividend Equity ETF (NYSE:
An ETF that is not as concentrated, but also has exposure to
consumer goods and other risk-off sectors is HDV. By
concentrating on high-quality U.S. companies that focus on high
dividends the ETF invests mainly in consumer goods, healthcare,
telecom, and utilities. PG is the fifth largest stock in the ETF
and telecom company AT&T (NYSE:
) is the top holding.
The ETF is up 18.5 percent in 2013 and is currently on pace to
finish the day at the best closing price since it began trading
in 2011. The dividend yield is 3.3 percent and it charges and
expense ratio of 0.40 percent.
SPDR Utilities ETF (NYSE:
The utility stocks have often been viewed as an option for
conservative investors looking for safety and high dividends. In
the last three weeks the ETF bounced off a double bottom pattern
and has rallied 5.6 percent to a new multi-month high. The ETF
remains off the 2013 high as well as the 2007 all-time high, but
the action recently has created some buzz.
The ETF is lagging the market this year with a gain of 12
percent, but it does pay a sizable dividend of 3.8 percent. If
interest rates begin to increase again it could hurt the utility
sector, thus keeping some investors away from the ETF. If XLU can
break above $39.75 it would signify a breakout and a buy signal
for the ETF. Until that occurs it could be a little risky to
enter into the utility stocks. The ETF charges a 0.18 percent
Two keys to successful long-term investing are diversification
and timing. Adding safety ETFs to a portfolio will often soften
the blow during market pullbacks, but if timed correctly they can
be a boost to the bottom line.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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