“In my opinion, this may not be worth it. In a similar way, investors often overpay for a hedge. This is particularly risky at a time when unconventional monetary policy is still distorting pricing in many asset classes,” noted Koesterich.
One way of looking at the dilemma facing investors shopping for staples or telecom ETFs is that, yes, they will get dividends, but they could be cheating themselves out of higher returns and paying up for the “privilege.”
“In short, defensive companies and sectors play a vital role in a portfolio. That said, defensive companies are not a free lunch,” said Koesterich.
Utilities Select Sector SPDR
ETF Trends editorial team contributed to this post.