Tech’s influence on the broader market
The list of S&P 500 tech stocks includes Microsoft, Alphabet, and Amazon. All three have negative year-to-date performance. Worse, these stocks and their large-cap tech peers are heavily represented in index funds and ESG funds, not to mention tech funds.
What you can do is increase your exposure to ETFs that invest in stable sectors like consumer goods, utilities, and healthcare. Because these sectors sell products and services that people need (vs. want), they’re less sensitive to temporary economic conditions.
Those sector ETFs may look very comforting, but there’s a huge caveat here. Six months is a short window of time.
On the other hand, diversifying more outside of tech — or any one sector — is smart. That’s especially true in two scenarios. One, you may not have realized your heavy exposure to tech if that exposure is mostly through funds. And two, your risk tolerance may be lower than it was when you built your portfolio, and now you’re ready to get more conservative.
If one of those situations applies, read on for some key stats on the three ETFs shown in the chart above.
1. Consumer Staples ETF
FTEC’s 30-day SEC yield, a standardized measure of dividend yield, is 2.11%. The fund’s total average return over the last five years is 9.74%.
|FTEC||FIDELITY COVINGTON TRUST MSCI INFORMATION TECHNOLOGY||108.67||-4.59||-4.05%|
|KO||THE COCA-COLA CO.||64.64||-1.52||-2.30%|
|COST||COSTCO WHOLESALE CORP.||531.72||-30.28||-5.39%|
2. Utilities ETF
Vanguard Utilities ETF holds 64 utilities stocks such as Duke Energy and wind and solar energy-producer NextEra Energy. The top 10 holdings comprise 54% of VPU’s total net assets — a fairly heavy concentration.
The fund pays out a 2.7% dividend yield, per the 30-day SEC yield formula. The five-year average annual returns are 10.87%.
|VPU||VANGUARD WORLD FDS VANGUARD UTILITIES ETF||154.73||-4.71||-2.95%|
|DUK||DUKE ENERGY CORP.||110.09||-3.71||-3.26%|
|NEE||NEXTERA ENERGY INC.||71.02||-2.51||-3.41%|
3. Healthcare ETF
The Health Care Select Sector SPDR Fund invests in healthcare companies that are also in the S&P 500. This approach gives you the sector exposure you want, plus a focus on larger, established organizations.
There are 64 stocks in the XLV portfolio, including UnitedHealth Group, Johnson & Johnson, and Pfizer. Like VPU, this fund has a top-10 concentration of more than 50%.
XLV has a 30-day SEC yield of 1.3% and has returned an annual average of 15% over the last five years.
|XLV||HEALTH CARE SELECT SECTOR SPDR ETF||130.28||-3.44||-2.57%|
|UNH||UNITEDHEALTH GROUP INC.||508.55||-15.87||-3.03%|
|JNJ||JOHNSON & JOHNSON||180.56||-3.03||-1.65%|
Diversify for stability
The recent tech sell-off is a reminder not to bet too big on any one sector — even technology. To diversify outside of tech and build more stability into your portfolio, consider ETFs in less cyclical sectors. Consumer staples, utilities, and healthcare are three examples.
If tech stocks are roller coasters, stocks in these stable sectors are more like tilt-a-whirls. You may still need a seatbelt, but the highs and lows should be less extreme.
- “ETFs 101”. Fidelity Investments.
- “Exchange-Traded Funds (ETFs)”. U.S. Securities and Exchange Commission.
- “Add an ETF without breaking the bank”. The Vanguard Group.
- “A Guide To Understanding Mutual Funds (2007)” (PDF). Investment Company Institute.
- “17 CFR Parts 239, 270, and 274 Exchange-Traded Funds; Proposed Rule” (PDF). U.S. Securities and Exchange Commission. March 18, 2008. Archived from the original (PDF) on July 6, 2017. Retrieved August 27, 2017.
- “Largest ETFs: Top 100 ETFs By Assets”. ETFdb.
- “SPDR ETFs: Basics of Product Structure”. State Street Global Advisors. July 30, 2014. Archived from the original on February 20, 2017.
- “ETFs Changing the Way Advisors Do Business, According to State Street and Wharton Study” (Press release). Business Wire. June 10, 2008.
- Global ETF Assets Hit $9 Trillion”. The Wall Street Journal.
- “Market share of largest providers of Exchange Traded Funds (ETFs) in the United States”. Statista.
- “Benefits of ETFs”. Fidelity Investments.
- “Benefits and considerations of ETFs”. Charles Schwab Corporation.
- “How ETFs Work” (PDF). WisdomTree Investments.
- “ETFs vs. mutual funds: Cost comparison”. Fidelity Investments.
- ETF vs. Mutual Fund: It Depends on Your Strategy”. Charles Schwab Corporation.
- What You Need to Know About Capital Gains Distributions”. Morningstar, Inc.
- What Are Mutual Fund Capital Gains Distributions?”. Dotdash.
- ETFs and Taxes: What You Need to Know”. Charles Schwab Corporation.
- Are ETFs Really More Tax-Efficient Than Mutual Funds?”. Morningstar, Inc.
- Vanguard’s Unique ETF Structure Presents Unique Tax Risks”. Morningstar, Inc.
- Vanguard Patented a Way to Avoid Taxes on Mutual Funds”. Bloomberg News.
- “System and method for supporting a new financial instrument for use in closed end funds”. 1997 – via Google Patents.
- Should You Worry About the Tax Efficiency of Vanguard ETFs?”. Morningstar, Inc.
- More Remote Working Apps:https://quintexcapital.com/?ref=arminham Quintex Capital https://www.genesis-mining.com/a/2535466 Genesis Mining http://www.bevtraders.com/?ref=arminham BevTraders
https://jvz8.com/c/202927/369164 prime stocks
https://jvz3.com/c/202927/361015 content gorilla
https://jvz8.com/c/202927/366443 stock rush
https://jvz4.com/c/202927/296191 gluten free
https://jvz1.com/c/202927/286851 diet fitness diabetes
https://jvz8.com/c/202927/213027 writing job
https://jvz4.com/c/202927/358049 profile mate
https://jvz8.com/c/202927/376524 super backdrop
https://jvz2.com/c/202927/184902 gaming jobs
https://jvz4.com/c/202927/343405 PR Rage
https://jvz6.com/c/202927/371547 design beast
https://jvz3.com/c/202927/376879 commission smasher
https://jvz2.com/c/202927/376925 MT4Code System
https://jvz6.com/c/202927/375959 viral dash
https://jvz1.com/c/202927/376877 forex expert
https://jvz8.com/c/202927/376381 ada leadz
https://jvz2.com/c/202927/337292 DFY Suite 3.0 Agency+ information
https://jvz8.com/c/202927/291061 VideoRobot Enterprise
https://jvz8.com/c/202927/327447 Klippyo Kreators
https://jvz8.com/c/202927/324615 ChatterPal Commercial
https://jvz8.com/c/202927/299907 WP GDPR Fix Elite Unltd Sites
https://jvz3.com/c/202927/342585 VidSnatcher Commercial
https://jvz3.com/c/202927/320972 Storymate Luxury Edition
https://jvz2.com/c/202927/320466 iTraffic X – Platinum Edition
https://jvz2.com/c/202927/330783 Content Gorilla One-time
https://jvz2.com/c/202927/301402 Push Button Traffic 3.0 – Brand New
https://jvz2.com/c/202927/297271 Designa Suite License
https://jvz2.com/c/202927/310335 XFUNNELS FE Commercial
https://jvz2.com/c/202927/343635 MediaCloudPro 2.0 – Agency
https://jvz2.com/c/202927/353558 MyTrafficJacker 2.0 Pro+
https://jvz2.com/c/202927/365061 AIWA Commercial
https://jvz2.com/c/202927/357201 Toon Video Maker Premium
https://jvz2.com/c/202927/351754 Steven Alvey’s Signature Series
https://jvz2.com/c/202927/344541 Fade To Black
https://jvz2.com/c/202927/290487 Adsense Machine
https://jvz2.com/c/202927/315596 Diddly Pay’s DLCM DFY Club
https://jvz2.com/c/202927/355249 CourseReel Professional
https://jvz2.com/c/202927/309649 SociJam System
https://jvz2.com/c/202927/263380 360Apps Certification
https://jvz2.com/c/202927/377557 Instant Website Bundle
https://jvz2.com/c/202927/377194 GMB Magic Content
https://jvz2.com/c/202927/376962 PlayerNeos VR