Burned by Tech Stocks? Consider These 2 ETFs Instead

If you saw the values of some of the tech stocks in your portfolio plummet by 40% or more over the past few months, you are not alone. If you still believe in the long-term prospects of those stocks and nothing has materially changed from a company or industry perspective, there is no need to sell or make any rash decisions — the market will bounce back.

That said, it’s a good idea to offset those short-term losses with investments that perform differently in a given market cycle. So instead of adding more tech stocks to your portfolio, consider these two exchange-traded funds (ETFs) for balance. Both are focused on high dividends and are made up mostly of value stocks, which are a good hedge against declining tech stocks.

1. WisdomTree U.S. High Dividend ETF

The WisdomTree U.S. High Dividend ETF ( DHS 0.06% ) has been among the top-performing ETFs on the market. Year to date, it has returned about 7%, and over the past 12 months, as of March 28, it has posted an 18% return. In a volatile time for technology stocks, it gives you positive returns as well as dividend income to be reinvested or pocketed.

WisdomTree has outperformed most of the ETFs in its class due to its unique methodology. It tracks its own index — the WisdomTree U.S. High Dividend Index. The index is weighted by the dividend each component company is projected to pay in the coming year, based on the most recent dividend. The methodology also applies a composite risk score to each stock based on three factors: value, quality, and momentum. Stocks with a better composite risk score will see their weight increase, while those that rank poorly will have a reduction in weight.

This results in a fund that invests in large, stable, high-quality companies that pay out good dividends. As of Feb. 28, financials represented 14.2% of the portfolio, followed by consumer staples (14.1%) and healthcare (12.7%). The fund has over 300 holdings, with ExxonMobil, Chevron, and Pfizer as the three largest.

It has been a solid long-term performer, with an average annual return of… Continue Reading at THE MOTLEY FOOL