As the equities markets touch new heights, more conservative players don’t want to press their luck and are looking at defensive investments and related exchange traded funds to hedge against another correction.
For instance, the Guggenheim Multi-Asset Income Index ETF (NYSEArca: CVY) covers a range of alternative assets that can zig when the market zags. The ETF include exposure to dividend-paying assets like American depositary receipts, real estate investment trusts, master limited partnerships, closed-end funds and preferred shares, writes Casey Murphy for Investopedia.
Currently, CVY shows a trailing 12-month yield of 5.10% and comes with a net expense ratio of 0.66%. The ETF is flat so far this year. [Income-Generating ETFs for a Long Retirement]
Additionally, the fund spreads around its weight exposure across its 150 holdings, with the top holding International Paper Company (NYSE: IP) making up 1.2% of the underlying portfolio.
For the technical chart watchers, Murphy points out that CVY is moving in a steady uptrend, with a 100-week moving average as a key level of support. Bearish price actions have been unable to knock down the fund from falling below its support over the years.
Alternatively, investors can look to areas that have shown lower correlations to broader market moves, including real estate, healthcare and quality income stocks.
Real estate investment trusts have traditionally acted as a good diversifier. Investors can track the REITs market through ETFs like the Vanguard REIT ETF (NYSEArca: VNQ) or iShares Dow Jones US Real Estate Index Fund (NYSEArca: IYR). Year-to-date, VNQ is up 25.6% and IYR is 22.9% higher. [Sector Classification Change Could Boost REITs ETFs]
The healthcare sector is also seen as a mainstay since Americans will need to look after their health no matter what the economy is doing. Year-to-date, the Health Care Select Sector SPDR (NYSEArca: XLV) gained 23.6% and Vanguard Health Care ETF (NYSEArca: VHT) increased 23.0%. [Healthcare ETFs for a Healthy Investment Portfolio]
Additionally, investors use dividend ETFs to track quality stocks. For instance, the Vanguard Dividend Appreciation ETF (NYSEArca: VIG) provides exposure to high-quality stocks with steady income growth, tracking stocks that have raised their dividends for at least 10 consecutive years. The SPDR S&P Dividend ETF (NYSEArca: SDY) targets the highest-yielding stocks from the S&P 1500 Composite Index that have raised their dividends for every year over the past 25 consecutive years. Year-to-date, VIG rose 11.0% and SDY increased 11.7%. VIG has a 1.93% 12-month yield and SDY has a 2.19% 12-month yield. [A Quality Dividend ETF to Limit Portfolio Volatility]
For more information on multi-asset strategies, visit our multi-asset ETFs category.
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. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.