6 Healthy ETFs Amid Coronavirus-Hit Economy

On World Health Day, we would like to draw investors’ attention to some ETFs that can make their portfolio immune to the effects of the coronavirus crisis, which has resulted in lockdowns and forced people to stay indoors. This situation is weighing heavily on economic growth and business activity.

Layoffs and jobless claims have risen unprecedentedly with businesses scaling back or temporarily shutting down their operations. Spending — the engine of the U.S. economy — has collapsed. Revenues of restaurants, hotels, movie theaters, gyms, and airlines have been badly hit with many of them on the brink of bankruptcy.

Like the six nutrients required for good health, we have highlighted an ETF each from six categories that could be good investments amid the ongoing turmoil:

Quality

Quality ETFs are generally rich in value characteristics as these focus on stocks with healthy balance sheets, high return on capital, low volatility, elevated margins, and a track of stable or rising sales and earnings growth. This approach advocates investments in safer stocks and reduces volatility when compared with plain vanilla funds. Academic research shows that high-quality companies consistently deliver superior risk-adjusted returns than the broader market over the long term.

While there are several quality ETFs available in the space, iShares Edge MSCI USA Quality Factor ETF (QUAL - Free Reportis the most popular. This fund provides exposure to stocks exhibiting positive fundamentals (high return on equity, stable year-over-year earnings growth, and low financial leverage) by tracking the MSCI USA Sector Neutral Quality Index. It holds 125 securities in its basket. Information technology holds 24.5% while healthcare, financials, and communications round off the next three spots. The product has amassed $14.9 billion in its asset base and charges 15 bps in annual fees from investors. Average trading volume is solid at around 1.5 million shares per day.

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