Bonds, gold and other safe haven options—where do investors go amid the turmoil in the equities market? If major airlines are canceling their flights amid the coronavirus outbreak, there is a place to head for safety—the Direxion Flight To Safety ETF (NYSEArca: FLYT).
“Sometimes, when market volatility is on the rise, finding places that can protect your money and avoid downside risk is huge,” Sean Sechler wrote in MarketBeat. “One of the crucial things to understand about investing is that risk is always a possibility. If you look at the recent volatility in the market, you might be wondering where you can keep your money safe until the dust settles. That’s why it can really pay off to understand what the most common safe-haven assets are.”
FLYT aims to deliver a simple, yet robust, approach to portfolio risk mitigation from equity market drawdowns while also providing long-term appreciation potential. By combining long-term U.S. treasury bonds, utility stocks, and gold bullion, the ETF may act as a diversified ballast for portfolios while also acting as a source of uncorrelated returns.
- A strategy that delivers attractive total return potential with defensive equity characteristics
- A way to introduce portfolio risk mitigation that does not require precision in timing and ongoing carry costs
- An ETF with a low correlation to equities and stable volatility can help deliver added diversification to portfolios
Why take FLYT for a spin? If the rollercoaster-like volatility isn’t enough, it’s the ease of having all the safe havens under one roof–in essence, a one-stop-shop for safety.
“The Direxion Flight to Safety Strategy ETF (FLYT) combines three asset classes with historically low correlation to stocks – long-term U.S. treasury bonds, utility stocks, and physical gold – to deliver investors with the potential to serve as ballast in portfolios during times of turbulence and offer an attractive total return and income opportunities in other times,” a Relative Weight Spotlight post by Direxion Investments noted.
A Relative Value Trade with Defensive Tilt
As coronavirus fears persist, if investors believe that U.S. defensive sectors will outperform cyclical sectors, the Direxion MSCI Defensives Over Cyclicals ETF (NYSEArca: RWDC) provides a means to not only see defensive sectors perform well, but a way to capitalize on their outperformance compared to cyclical sectors.
RWDC seeks investment results that track the MSCI USA Defensive Sectors – USA Cyclical Sectors 150/50 Return Spread Index. The Index measures the performance of a portfolio that has 150% long exposure to the MSCI USA Defensive Sectors Index (the “Long Component”) and 50% short exposure to the MSCI USA Cyclical Sectors Index (the “Short Component”).
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