6 ETFs For A Scary September

As we exited a lukewarm August and stepped into the final month of Q3, the investing cohort must have shifted its focus to the likely market movement in September. This is especially true given the month’s cursed seasonality in the equity market.

It is historically the worst month of the year for stocks. According to moneychimp.com, a consensus carried out from 1950 to 2015 has revealed that September ended up offering positive returns in 29 years and negative returns in 37 years, with an average return of negative 0.68%, which is worse than any month.

Some of most threatening events hit us in September including the start of the Great Depression in 1929 or the fall of Lehman Brothers in 2008. Even this September bears the risk of considerable negative changes to the market in case the Fed hikes rates or gives some hawkish hints in its September 20-21 meeting or if OPEC fails to take some constructive decisions over output control in the September 27-28 informal meeting in Algeria.

Volatility is expected as key U.S. indices are hovering at highs and sparked off overvaluation concerns. Not only U.S. stocks, U.S. treasuries are also overvalued after a stellar run for the most part of this year on global growth issues and the resultant risk-off trade sentiments.

Yield on 10-year U.S. Treasuries hovered below 2% despite renewed talks over the Fed hike amid signs of a recovery in the U.S. economy at August end. On the other hand, downbeat U.S. manufacturing data for the month August released lately lessened chances of a September hike to start the month, promising to keep yields low in the near term. So, the yield opportunity is miniscule for U.S. Treasuries.

All these make it more important to pin point the ETFs that could safeguard investors from any steep and sudden market swing as well as earn some gains.

Principal EDGE Active Income ETF (YLD - ETF report)

This fund has 41% exposure to high-yield securities, followed by 31% in equities, 11% in investment-grade securities and another 11% in cash. Going by fixed-income maturity, the product mainly targets the middle part (38%) of the yield curve. The fund yielded about 4.45% as of August 31, 2016. Such a diversified exposure may cushion investors against any kind of volatility.

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