Top Recommended ETFs to Consider in 2017
This article explores the top ETF options for 2017, focusing on conservative, inverse, and short-term bond funds. It provides insights into their structures, investment strategies, and suitability for different investor goals. Readers can use this guide to diversify their portfolio effectively, reduce risk, and hedge against market downturns. Ideal for cautious investors, these ETFs offer a balanced approach to asset allocation, short-term security, and market exposure, ensuring a strategic investment path for the year.
Following an energetic first quarter where the S&P 500 surged over 7%, market conditions have since become more subdued, with valuations reaching high levels that dampen investor enthusiasm. Currently, exchange-traded funds (ETFs) are viewed as a more favorable investment option than individual stocks, thanks to their diversified nature which helps reduce potential losses from poor-performing assets. What investment approach should one adopt for the remainder of 2017? This article highlights some of the best ETFs to buy this year:
iShares Core Conservative Allocation ETF (AOK)
Type: Asset Allocation (Conservative)
Expense Ratio: 0.25%
The iShares Core Conservative Allocation ETF (AOK) provides a balanced, low-risk portfolio that acts like a ready-made investment. It typically combines cash, bonds, and stocks aligned with a conservative strategy, emphasizing bonds over equities. AOK invests roughly 1% in cash, 32% in stocks, and 67% in fixed income securities. Additionally, about 35% of its holdings are in international markets like Germany (3%), U.K. (4%), and Japan (5%), through participation in various iShares funds including the iShares U.S. Credit Bond ETF and the iShares S&P 500 ETF.
ProShares Short S&P 500 ETF (SH)
Type: Inverse Index
Expenses: 0.89%
The ProShares Short S&P 500 ETF is ideal for investors who are either optimistic about hedging or bearish on the market. It takes an unleveraged short position on the S&P 500, yielding approximately 1% for each 1% decline in the index. Its performance closely mirrors the inverse of the S&P 500, making it a useful tool to hedge long positions. However, investors should be aware that over periods longer than one day, returns can diverge due to daily compounding.
Pimco Short-Term Bond ETF (MINT)
Type: Short-Term Bonds
Expenses: 0.35%
If stability is your goal, MINT offers liquidity and minimal volatility, with a current yield slightly above 1%. Its main focus is to outperform money market funds by holding short-term, investment-grade debt from companies like Verizon and Barclays PLC. For five years, the fund has maintained a stable value around $100.50 to $101.50, making it a reliable choice for conservative investors seeking modest income and safety.
