While the situation is Greece is approaching some semblance of a resolution, the global economy is far from out of the woods. We may continue to see bumps on the road back, but with these exchange traded funds (ETFs), you can help protect your assets.
First things first. Don’t panic. There are eight things to look for when safeguarding your money, writes Brett Arends for The Wall Street Journal.
Blue-chips. No one’s really worried about their blue-chip stocks during the recent upheaval, and any volatility is usually temporary.
Look for yield where you can find it. The debt crisis in Europe will likely keep European Central Bankers from raising rates, and this will put pressure on the Fed to follow suit. The average money-market account is paying about 0.76% interest and a one-year certificate of deposit is just 1.2%. With inflation at 2.4%, you’re losing money just by saving.
Mortgage. As rates remain low, homeowners may find cheaper mortgages. The rate on a 30-year conforming loan is down to 5.07%. The yield on 10-year Treasury bonds has also fallen 3.4% from 4% a month ago.
- iShares Lehman 7-10 Year Treasury Bond Fund ETF (NYSEArca: IEF)
Dividends. Dividend-paying stocks are providing decent yields, with many a stock dishing out yields of 3% or greater. [Why Now May Be the Time for Dividend ETFs.]
Big European companies. The long-established European names have plummeted in value in the wake of the recent events. The drop in European stocks won’t continue forever and it is a good idea to keep an eye out on the situation.
- SPDR STOXX Europe 50 (NYSEArca: FEZ)
High-yield bonds. Investors were quick to dump anything “risky,” which included high-yield/junk bond ETFs. However, the funds have made some small gains after the exodus. [How a Market Decline Affects ETF Trading.]
- iShares iBoxx $ High Yield Corporate Bond (NYSEArca: HYG)
- SPDR Barclays High Yield Bond (NYSEArca: JNK)
Beware of “safety.” Long-term Treasury bonds like the 30-year Treasuries only pay 4.1%. Investors turn toward them in times of uncertainty but inflation could hurt you in the long run. Bond coupons don’t adjust to reflect rising prices. [More on Treasuries and Interest Rates.]
- Direxion Daily 30-Yr Treasury Bear 3x Shares (NYSEArca: TMV)
- iShares Lehman 20+ Year Treasury Bond Fund (NYSEArca: TLT)
TIPS. Treasury Inflation-Protected Securities, or TIPS, don’t offer much at current levels. The “real” yield on 10-year TIPS is just 1.25% and the 30-year is 1.73%. Figures well above 2% will be a decent deal for investors. [More on TIPS.]
- iShares Barclays TIPs Bond ETF (NYSEArca: TIP)
- SPDR Barclays Capital TIPS (NYSEArca: IPE)
- PIMCO 1-5 Year U.S. TIPS (NYSEArca: STPZ)
Lastly, you can insulate yourself from turbulence by having a trend following strategy with a pre-determined point at which you sell when the markets decline. Our strategy is to sell when a fund drops below its 200-day moving average or 8% off the recent high. [How to Follow Trends.]
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.