Exchange-traded funds (ETFs) are a popular investment option among both novice and experienced investors. They offer the benefits of diversification, flexibility, and low expense ratios. In this article, we will take a closer look at the 7 best ETFs to buy today that can help you diversify your portfolio and maximize your returns.
Investors have a few reasons to be optimistic in this period of December. After losing more than 9% in September, the S&P 500 stock index rose about 8% in October. This increase is due to decent profits made by large blue-chip stocks. However, these benefits are far from perfect. They were prompted by large price increases that companies passed on to consumers. Worse still, the problems of big tech companies have persisted. Despite signs of improvement, it seems naive to revert to the old ways of investing on Wall Street.
ETF Simplify Interest Rate Hedge (ticker: PFIX)
One of Wall Street’s best-performing ETFs, PFIX is up about 100% year-to-date. This is because profits are made when interest rates rise.
The fund holds interest rate options designed to provide a direct upside to this trend. The US Federal Reserve has raised rates 6 times this year. As a result, this has driven benchmark interest rates from almost zero at the start of the year to around 4% currently, with the prospect of further hikes in income.
The Invesco DB US Dollar Index Bullish Fund (ticker: UUP)
A variant of the previous ETF that benefits from rising rates is the Invesco fund. This is because it performs well when the US dollar appreciates against other currencies.
Specifically, the UUP is linked to futures contracts that pit the dollar against 6 major world currencies:
- euro,
- Japanese yen,
- pound sterling,
- Canadian dollar,
- the Swedish krona,
- the Swiss franc.
Thanks to America’s relative strength in an uncertain economic environment, as well as its interest rate hikes making its currency even more stable, this Invesco ETF is up more than 15 % over the year and continues to set new highs. In conclusion, this trend does not seem to subside in the near future.
ETF Energy Select Sector SPDR Fund (ticker: XLE)
The strong energy stocks at the beginning of the year, thanks in particular to the disruptions in global supply linked to the invasion of Ukraine by Russia, have collapsed this summer when crude oil prices returned from their highs. But lately, the energy sector has made a comeback. The XLE fund has rallied to levels near its previous highs.
With $40 billion in assets under management, this fund is one of the most popular ETFs in the energy sector. With oil back to $90 a barrel, things are looking good for this fund in 2023.
The iShares MSCI Brazil ETF (ticker: EWZ)
A few years ago, the Brazilian economy was in shambles due to government scandals and COVID-19. However, the recession ended there in 2021 and the Brazilian economy is slowly recovering on the right track. In addition, this country rich in natural resources exports a lot of raw materials. Their values increase with global resource inflation. Brazil is the largest economy in Latin America and the most likely to benefit from a sustained recovery in the global economy.
Investors looking to the future beyond the disruptions of 2022 might want a long-term position in this ETF. In the meantime, the EWZ fund has recorded a double-digit rise since January 1. This allowed him to make significant gains while the rest of Wall Street was struggling.
The Invesco S&P 500 High Dividend Low Volatility ETF (ticker: SPHD)
For a short-term tactical gamble and covering to survive the crisis, the SPHD is a great option.
As the name suggests, this fund combines the high dividend potential of blue-chip stocks with a low-volatility methodology to ensure portfolios hold up the shock even in the event of a slowdown.
Stocks such as tobacco giant Altria Group Inc. (MO) and telecommunications group AT&T (T) make up the portfolio. While not as buoyant as tech stocks during a bull market, SPHD constituents will provide the stability that many investors are currently seeking. In addition, the fund offers a generous yield of 4.3%.
The Vanguard Short-Term Corporate Bond ETF (ticker: VCSH)
The stability and yield are found in the Vanguard bond fund. Indeed, the latter pays 1.8% on a tracking basis. The history of its most recent distributions achieves a phenomenal return of 5.4%.
More so, VCSH is extremely stable thanks to the profit of 2,200 short-term loans in its portfolio. These include bonds from companies such as mega-bank JPMorgan Chase & Co. (JPM) and tech mega-cap Microsoft Corp. (MSFT), which are almost certain to repay their debts on time.
To be clear, bond funds tend to underperform in a “risk on” bull market where the equity market is soaring. In addition, bond funds can often fall when interest rates rise. The short-term nature of VCSH shields it from some of the volatility risks of other, longer-term bond funds. However, the risks are still worth noting.
The ProShares Short S&P 500 ETF (ticker: SH)
The ProShares Short S&P 500 (SH) is a very popular inverse fund. The latter has been designed to provide the opposite performance to that of the S&P 500 Index.
Thus, SH has progressed by around 16% since the beginning of the year, while the S&P has evolved in the same direction. SH has nearly $4 billion in assets at present, making it one of the most popular ways for investors to insure their portfolio against the downside.
However, this fund is a bad investment if the bull market returns. Still, given the ongoing struggles of Wall Street’s biggest stocks, it may make sense to hedge a little against the November downside.
7 Best ETFs to Buy Now:
- Simplify Interest Rate Hedge ETF (PFIX)
- Invesco DB US Dollar Index Bullish Fund (UUP)
- Energy Select Sector SPDR Fund (XLE)
- iShares MSCI Brazil ETF (EWZ)
- Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
- Vanguard Short-Term Corporate Bond (VCSH)
- ProShares Short S&P 500 (SH)
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