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business newsEleven for 2011: ETFs for the Conservative Investor
Exchange traded products can be volatile. But if ETFs are going to spell doom for mutual funds, ETF issuers have to make room for conservative investors -- and they have.
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If 2010 reminded ETF investors of one thing it is that exchange-traded products can be quite volatile. Throughout the course of the year, it was not uncommon to see select emerging markets and commodities funds move 5%-7% in a single trading day -- and I'm just talking about the unleveraged funds.
Throw in leveraged ETFs and the love affair that professional traders have with them and it's safe to say the ETF universe can and will continue to be volatile.
That doesn't mean there aren't alternatives for conservative investors. In fact there are plenty. If ETFs are really going to spell doom for mutual funds, ETF issuers have to make room for conservative investors -- and they have.
Let's take a look at 11 ETFs conservative investors should watch in 2011.
1. SPDR Gold Shares (GLD):
Yes, gold can be volatile. But it can be argued that no portfolio should be without some gold exposure as an inflation fighter. GLD is still the king of gold ETFs.
2. JPMorgan Alerian MLP Index ETN (AMJ):
Yes, the MLP trade became quite crowded in 2010 and several new MLP ETFs came to market, which may increase volatility. But the hunt for yield isn't going to end in 2011, and there are still opportunities to make money in this space.
3. Vanguard Dividend Appreciation ETF (VIG):
Rather than trying to pick the best Dow stocks and other blue-chip names, investors can opt for VIG, which holds a broad swath of dividend darlings. The low expense ratios that Vanguard is known for apply to VIG, and the ETF may get a boost from positive dividend news in January and February -- two months that are normally heavy on dividend increases.
4. Vanguard Small Cap Value ETF (VBR):
Having some small-cap exposure -- particularly as the US economy continues to rebound -- is a solid plan, and VBR helps with low fees and a lack of truly speculative small-cap issues.
5. Consumer Staples Select Sector SPDR (XLP):
Play some defense with a bunch of reliable dividend payers and liquid names whose products are already found all over your house.
6. WisdomTree Dividend ex-Financials ETF (DTN):
For the dividend hunter not willing to wait for financials to get their dividend act together, DTN offers exposure to tobacco, telecom, and utilities names among others.
7. iShares Dow Jones Select Dividend Index (DVY):
Don't be deceived by the name: DVY does NOT focus exclusively on Dow stocks. The one knock on this fund is that utilities get the biggest sector weight at over 27% and that would not be a good thing if interest rates climb higher.
8. WisdomTree International LargeCap Dividend ETF (DOL):
International stocks frequently offer better dividends than their US counterparts in the same industries, so consider putting DOL on your 2011 list.
9. iShares S&P Conservative Allocation ETF (AOK):
AOK doesn't get a lot of attention, but it is an interesting mix of stocks and bonds a conservative investor can warm up to.
10. Vanguard Total Bond Market ETF (BND):
As of this writing, it might be a bit early to jump into the bond market, but investors with longer-term time horizons can start incrementally building a position in BND.
11. iShares S&P US Preferred Stock Index Fund (PFF):
Preferred stocks offer high yields, almost guaranteed dividends, and don't decline as violently as common stocks when the market falls. PFF is a sound option for the investor looking to mitigate market volatility.
Below, find some more great ETF and market content from Benzinga:
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