Going into the New Year I think investors will want to think about adding safety and stability to their portfolios. Major indices like the S&P 500 and the Dow Jones Industrial Average are on their way to finishing up 11% for 2010 adding on to their 18% increase in 2009.
Why the 5 ETFs were chosen?
Now that investors have made back some of their losses from 2008 I believe investments in dividend paying ETFs and even a small position in a Bear Market ETF are up for consideration. The following are my thoughts for the 5 Best ETF Moves for 2011. Please note that none of the following picks are core holdings. Each should be considered as a satellite component of an existing well-diversified portfolio.
- Vanguard Short-Term Bond ETF (NYSE:BSV)
Last year we recommended the iShares Barclays 1-3 Year Treasury Bond (NYSE:SHY). This year we are sticking with the same theme of protecting your portfolio against inflation with the recommendation of the BSV fund. Major differences for the BSV fund include:
1. longer average time duration of maturity for the Treasuries
2. a slightly lower annual expense ratio
3. a higher dividend yield of 2.25%
- iShares Dow Jones US Utilities (NYSE:IDU)
Energy is on the list for 2011 because of peoples insatiable need to be able to plug in for power. Whether it’s the increase in the number of laptops and flat screens at home or the need to recharge portable devices on the go, energy consumption may be a good move to make in your portfolio. According to the U.S. Energy Information Administration energy consumption in industrial, transportation, residential and commercial sectors are expected to increase steadily through 2035.
- iShares S&P U.S. Preferred Stock Index (NYSE:PFF)
The preferred stocks in the PFF fund do produce a health dividend, but the risk is in the fact that the fund is heavily weighted in financial services companies. The next pick is meant to help mitigate the overweighting in financials.
- Direxion Daily Financial Bear 3X Shares (NYSE:FAZ)
I think of leveraged bear market funds as drugs that should only be used with caution by investors who are willing to pay close attention.. The FAZ fund goes up in value when financials are going down. The FAZ fund finds itself near a 52-week low as the Dow Jones Industrial Average continues to hover around 11,500.
- Guggenheim International Multi-Asset Income (NYSE:HGI)
Investors should always keep their eye on what’s happening overseas. The HGI fund offers investors exposure to Western Europe, Asia ex-Japan, and Latin America with a strong emphasis in telecom, energy and financial services.
Disclosure: At the time of publication the author did not own any of the ETFs mentioned in the article.
ETF Ready is produced and published by Gregory S. Davis of the Registered Investment Advisory G.Davis Capital (www.gdaviscapital.com)