Looking for simple trading strategies that will help you reduce your risk during the dog days of summer but not keep you out of the profits? Then consider three low risk ETF investments for the coming months that will provide built-in diversification to your portfolio and help you avoid getting jerked around by the stock market.
Exchange traded funds are baskets of equities, and that means that you’re buying a share in a lot of companies instead of just one. That will help you avoid a rude awakening if a single company takes a stumble due to a scandal or a poor earnings report, but still allow you to make a sector bet or focus in on big profit opportunities.
Here are three different low-risk ETFs from three top InvestorPlace experts:
1 – iShares DJ US Insurance Index Fund (IAK)
- Picked by: Louis Navellier, editor of Blue Chip Growth
- Strategy: Low-risk, long-term investing in stable blue chips
When it comes to the best ETFs to buy, I’m recommending the iShares DJ US Insurance Index Fund (IAK). This fund has been performing well in recent weeks as the yield curve (the difference between short-term and long-tem interest rates) has widened and health insurance stocks rallied in the wake of the passage of the national health plan. With the controversial provision mandating that individuals purchase private health care insurance or face a stiff penalty, private sector health care insurers are poised to reap a windfall from the new law. Indeed, the top three holdings in this iShares fund are The Travelers Companies (TRV), Prudential Financial (PRU) and AFLAC Inc. (AFL).
2 – SPDR Utilities (XLU)
- Picked by: Richard Young, editor of Intelligence Report
- Strategy: The best bedrock investments for protection and profits
SPDR Utilities (XLU) may not seem like a hot ETF since it’s down -8% YTD, but don’t worry about the relative underperformance of the utilities sector. While making bets on the best sector is a key to profitable investing, frantic sector-chasing can be counterproductive in the long term. The bottom line is that if the economy is entering a sustainable recovery, utilities will rise as electricity demand rises. But if you want a reason why things are looking up in the short-term, consider the recent market volatility and then remember that high-yielding dividend stocks like utilities are always safe-haven investments and risk averse traders will pile into XLU components as they flee more aggressive plays. Top holdings are Exelon (EXC), Southern Co. (SO) and Dominion Resources (D).
3 – ING Natural Resources ETF (IRR)
- Picked by: Bryan Perry, editor of Cash Machine
- Strategy: High-income dividend investing
If you think dividend investing limits you to a complex mix of individual stocks, think again. Simple trading strategies such as using ETFs to buy a basket of great stocks can apply to income investing and dividends as well. In fact, one of my favorite dividend plays right now is an ETF — the ING Natural Resources ETF (IRR). Energy prices are back on the rise, fueled by growing optimism of a global economy bottom and led by China’s remarkable economy where GDP growth is back above 7%. This ETF has big potential in this environment. IRR focuses on providing a total return through a combination of current income, capital gains and capital appreciation. To do this, it invests at least 80% of its assets in equity securities or derivatives of natural resources companies. A portion of IRR, 20% or so, is dedicated to securities in emerging market countries. Top holdings include Exxon Mobil (XOM), Chevron (CVX) and Schlumberger (SLB).
Each of these three InvestorPlace advisors were recommending these stocks in their respective newsletters at the time of this writing.