ETFs To Hideout In While New Trends Take Shape

Uncertainty in the markets can be a scary thing and often prompt ill-timed moves that set your portfolio back from achieving your goals. The initial days of trading in 2015 have certainly shown an increase in volatility that may prove to setup new trends in the near future. The SPDR S&P 500 ETF (SPY) is more than 4% off its all-time highs and initiating the worst start to a New Year since 2008.

The unknown is how long will it take for new opportunities to develop and where the most rewarding setups may ultimately materialize. Patience and discipline may be your best allies when stalking new trends.

Instead of just languishing in cash that is paying nothing, you may be better off seeking out conservative strategies that give you some measure of correlation to stock or bonds. These short-term holdings using diversified ETFs that will give you the opportunity for some income, capital appreciation, or both.

Short Term Bonds

Investors that favor short-term bond ETFs as temporary hideouts may want to check out the iShares 1-3 Year Credit Bond ETF (CSJ) or the Vanguard Short-Term Bond ETF (BSV). CSJ is made up of over 900 investment grade credit securities from both domestic and foreign issuers with an effective duration of less than 2 years. The fund has a yield of approximately 1% and charges an expense ratio of just 0.20%. In addition, the net asset value has been very stable over the last several years.

BSV has a similar yield with more government related fixed-income and a slightly higher duration as well. Depending on your broker, you may be able to purchase one or both of these ETFs commission-free in order to be able to trade in or out when needed without eating into income or principal.

Asset Allocation Funds

If you are looking for a fund that is designed to take less risk than the overall market, you may want to consider an asset allocation fund such as the iShares Conservative Allocation ETF (AOK). This ETF takes a “fund of funds” approach to allocate among stocks, bonds, and cash with the goal being low volatility.

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Disclosure: FMD Capital Management, its executives, and/or its clients may hold positions in the ETFs, mutual funds or any investment asset mentioned in this post. The commentary does not constitute ...

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