3 Investments for Scared Investors

by Richard Band | May 25, 2011 3:00 am

It’s time to sit back, take a deep breath, loosen your death grip on that computer mouse and buy stocks! Or buy exchange-traded funds (ETFs) that will profit from bullish market moves.

I’ll share some of my favorite ETFs to buy now in just a moment, but first a word on why I think you should be buying anything in the first place. I’ve been around this track for almost 38 years, and it’s always the same. As soon as the stock market backs off a few percentage points, investors’ courage begins to melt. We find every excuse in the book not to buy. And, in retrospect, that’s exactly, when we should have been buying.

I’m not blaming anyone. All of us, myself included, have a tendency to chicken out when prices are falling. But those are the times when successful investors put their emotions aside and focus on the facts.

Here are some of the key facts right now. So far, the stock market pullback from the April 29 high is very much following the historical pattern of an intermediate-term (two to three months) retracement within an ongoing primary bull market.

Measures of breadth and volume have displayed only moderate selling pressure — not even as strong as the selling we observed during the March 2011 dip, and much milder than we saw a year ago in May and June. Meanwhile, the CBOE equity put-call ratio and other gauges of public sentiment show that mom-and-pop investors have turned almost as cautious as they were at last summer’s lows.

In short, many investors appear to be overreacting to a routine, minor decline. That, alone, doesn’t guarantee prices won’t slip somewhat further.

From a contrarian standpoint, however, it suggests the market will find a good bottom before retreating even 10% from its April peak. Then a recovery in late summer or early fall should take the blue-chip indexes back up to fresh highs for the year.

Currently, I recommend the following conservative stock ETFs to buy: iShares Russell 1000 Growth Index (NYSE: IWF[1]) and WisdomTree Total Dividend (NYSE: DTD[2]). These ETFs will remain a buy as long as the S&P 500 index is quoted below 1,322 (3% below its April 29 closing high).

For income seekers, one of my favorite REITs, Government Properties Income Trust (NYSE: GOV[3]), has wandered back into a buy zone. GOV derives 93% of its rents from federal and state tenants, making this just about the safest way you can own office buildings. It currently yields 6.7%.

Source URL: https://investorplace.com/2011/05/conservative-stock-etfs-to-buy-for-nervous-investors/

---