As 2021 starts to creep into investors’ minds, the need to stave off a market downturn could become more apparent. A Motley Fool article discussed certain exchange-traded funds (ETFs) to consider for going crash-proof.
“To say that 2020 has been a rollercoaster for the stock market would be an understatement,” the article said. “The first quarter of the year was one of the worst on record, with the S&P 500 falling by 34% in just a matter of weeks. Then almost as quickly as the market plummeted, it recovered its losses and experienced all-time highs.”
“Now with a contentious election around the corner and the number of COVID-19 cases skyrocketing across the country, some investors predict that’s a recipe for another crash,” the article added. “While nobody can say for sure what the market will do, there’s one type of investment that can make it much more likely your portfolio will survive a market downturn.”
One of the funds mentioned was the iShares Core S&P Total U.S. Stock Market ETF (ITOT). The fund seeks to track the investment results of the S&P Total Market Index (TMI), which is comprised of the common equities included in the S&P 500® and the S&P Completion Index.
The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. It may invest the remainder of its assets in certain futures, options and swap contracts, cash and cash equivalents, including shares of money market funds advised by BFA or its affiliates, as well as in securities not included in the underlying index. ITOT includes the following features:
- Low-cost and convenient access to the total1 U.S. stock market in a single fund
- Exposure to the total1 U.S. stock market, ranging from some of the smallest to largest companies
- Use at the core of your portfolio to seek long-term growth
“Trying to predict how the market will perform over the next few weeks or months can be nearly impossible, and attempting to time the market could cause you to lose more than you gain,” the article explained. “For that reason, it’s often better to invest for the long term, focusing on strong investments that can weather market volatility. While there are never any guarantees in the world of investing, one type of investment that’s more likely to survive a market crash is the index ETF, specifically a broad market index ETF.”
“Again, there are no guarantees when you invest. But broad market index ETFs have a strong track record of bouncing back after market crashes,” the article added. “The market itself has historically always recovered from each of its downturns. And because many index ETFs track the market, that means they’ll rebound along with it.”
For more news and information, visit the Equity ETF Channel.