The Best ETFs For A Weak Market

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The market has been weak lately, and nobody is predicting a turnaround anytime soon. What to do? Here are four of the best ETFs to consider for this market environment, suggests Harry Domash, income specialist and editor Dividend Detective.

We looked for ETFs that are currently generating positive returns. Additionally, they all have strong historical return records. Consequently, they have a reasonable chance of producing positive returns, even in this market.

Sound interesting? First, here's a little background. As you probably know, ETFs are similar to conventional mutual funds in that both track the performance of portfolios of stocks, bonds, etc. One difference is that ETFs trade just like stocks. Thus, they're easier, and often less expensive to buy and sell than conventional mutual funds.

Another difference between ETFs and mutual funds is that unlike mutual funds, most ETFs list their current portfolio holdings online every market day. So, I'll include each fund's top five holdings in the write-ups. Thus if you'd rather buy individual stocks than ETFs, you'll have around 20 worthwhile individual stock ideas to check out.

Invesco KBW Property PI & Casualty Insurance (KBWP) tracks a capitalization weighted index of U.S.-based property and casualty insurance companies. Its biggest holdings include Progressive Corporation (PGR), Allstate (ALL), Travelers Companies (TRV), American International Group (AIG), and Chubb (CB).

The fund has returned 4.8% year-to-date, 12.2% over the past 12-months, and averaged 11% annually over the past five years. It pays quarterly dividends equating to a 1.9% annual yield.

Global X U.S. Infrastructure Development (PAVE) holds U.S.-based companies that it expects to benefit from the expected U.S. government's increased infrastructure spending. Specifically those supplying raw materials, heavy equipment, engineering services, and construction services.

Its biggest holdings include United Rentals (URI), Parker Hannifin (PH), Eaton (ETN), Nucor (NUE) and Fastenal (FAST). Global X has returned 8.1% year-to-date, 9.0% over 12-months, and averaged 12.3% annually over five years. It pays semi-annual dividends (1.0% yield).

Invesco S&P SmallCap 600 Revenue (RWJ) holds the highest revenue growth stocks in the S&P 600 SmallCap Index, which holds 600 “financially viable” small-cap stocks.

Its biggest holdings include World Fuel Services (INT), United Natural Foods (UNFI), Community Health Systems (CYH), Andersons, Inc. (ANDE), and Group 1 Automotive (GPI). The fund has returned 11.2% year-to-date, 2.8% over 12-months, and averaged 13.1% annually over five years. It pays quarterly dividends (0.9% yield).

Invesco S&P SmallCap 600 Pure Value (RZV) picks members of the S&P SmallCap 600 Pure Value Index, which picks holdings based on price/book, price/earnings, and price/sales ratios.

Its biggest holdings include Olympic Steel (ZEUS), M/1 Homes (MHO), Telephone & Data Systems (TDS), Genworth Financial (GNW), and AMC Networks (AMCX). The fund has returned 12.5% year-to-date, 7.0% over 12-months, and averaged 8.4% annually over five years. It pays quarterly dividends (1.4% yield).

As always, past performance doesn't predict the future. Do your due diligence. The more you know about your holdings, the better your results.

About the Author

Harry Domash publishes DividendDetective, a site specializing in high-dividend investing, and WinningInvesting, a free site featuring how to investing tutorials, and many other features on being a better investor.

He is best known for his investing columns that have appeared regularly in publications such as Business 2.0 Magazine, the San Francisco Chronicle, and financial Web sites such as MSN Money and Morningstar. Mr. Domash is also the author of the bestselling fundamental analysis book, Fire Your Stock Analyst, published by Prentice Hall, which has been translated into Japanese and Chinese.

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