Renowned investors, such as Warren Buffet and George Soros, have always said that making your money work for you is the best way to work.
Truthfully, investing relies on your every decision, making it essential that you’re knowledgeable and well-informed of all entry and exit strategies with every share, stock, and investment vehicle you find potential.
One of the biggest challenges to making proper investments is constructing a well-rounded portfolio. However, “well-rounded” is a subjective term that differs with every investor.
On the other hand, both high and low-risk appetite investors agree: portfolio balancing depends on economic situations. Therefore, knowing different investment vehicles, such as exchange-traded funds (ETF), is always imperative.
During bear recessions similar to 2020, high-quality ETFs will have lower-priced entry barriers. This opportunity can give starting and experienced investors a chance to become part of the following funds’ growths:
1. S&P500 – Vanguard S&P 500 ETF (VOO)
- Expense ratio: 0.03%, or $3 annually for every $10,000 invested
- One-year return: 18%
- Dividend yield: 1.8%
Any investor who has yet to purchase any ETF stocks that tracks an index fund will want to consider the Vanguard S&P 500 ETF (VOO). One of the best index funds available in the market, it reflects the U.S. economy’s current state, including the technology and biotechnology-oriented Nasdaq composite. The U.S. economy is a significant market that investors remain bullish despite any downturns, and VOO is the key to this top-level market exposure.
2. Gold – SPDR Gold Shares (GLD)
- Expense ratio: 0.40% or $4 annually for every $10,000 invested
- One-year return: 20.23%
- Dividend yield: 0.0%
Gold might not directly correlate with the economy, but it still has a high worth across numerous markets. The SPDR Gold Shares (GLD) reflects the actual performance of gold prices in the market. It derives its value by subtracting gold’s current price against the trust’s operational costs. The GLD ETF has a very low expense ratio with extremely high one-year returns, making it an ideal choice for numerous investors.
3. Tech – Invesco QQQ Trust (QQQ)
- Expense ratio: 0.20% or $2 annually for every $10,000 invested
- One-year return: 47.02%
- Dividend yield: 1.03%
Technology-oriented Invesco QQQ Trust (QQQ) monitors the Nasdaq-100 index’s price and complete performance based on the ETF’s decisions and performance. Nasdaq’s index is the direct reflection of the U.S.’ technology and biotechnology industries, both of which have continuously improved throughout the years. With a low expense ratio and exceptional one-year returns to date, this ETF is a long-term fund any investor wants to have.
4. Real Estate – Vanguard Real Estate ETF (VNQ)
- Expense ratio: 0.12% or approximately $1 for every $10,000 invested
- One-year return: -6.55%
- Dividend yield: 3.45%
The real estate market isn’t in the best shape in 2020 because of the COVID-19 pandemic. However, real estate is always a rebounding asset, which the Vanguard Real Estate ETF (VNQ) prioritizes. Closely tracking the MSCI US Investable Market Real Estate 25/50 Index, VNQ makes its decisions using the index’s reports on all public REITs, valuations, and other real-estate relevant actions and investments. A non-diversified, aggressive stock, VNQ can go up and down at any period, but just like real estate values, it will always recover and give its investors high value.
5. Preferred stock – Invesco Preferred ETF (PGX)
- Expense ratio: 0.52% or approximately $5 annually for every $10,000 invested
- One-year return: 7.3%
- Dividend yield: 4.91%
Renowned investor Warren Buffet has always been one to take calculated risks, and he believes preferred stocks always paved the way beyond any investment break-even. Invesco’s Preferred ETF (PGX) is an assortment of preferred securities while closely tracking the ICE BofAML Core Plus Fixed Rate Preferred Securities Index. One of the best non-diversified ETFs to buy, PGX invests most of its assets (80%) in its fund managers’ preferred securities in U.S. dollar-denominations using the underlying index.
6. Developed Market Stocks – Vanguard Developed Markets ETF (VEA)
- Expense ratio: 0.05% or $0.50 annually per $10,000 invested
- One-year return: 2.18%
- Dividend yield: 2.11%
The FTSE Developed All Cap ex U.S. Index monitors 3,873 common stocks from all market caps sizes in Canada, Europe, and the Pacific. The Vanguard Developed Markets ETF (VEA) monitors and makes its decisions using the index’s data. Fund managers will replicate the target index by investing all of its assets in stocks making up the index to closely match the index. Truthfully, this is one of the best ETFs to buy in 2021.
7. Stable dividend – Schwab U.S. Dividend Equity ETF (SCHD)
- Expense ratio: 0.60% or $6 annually per $10,000 invested
- One-year return: 14.20%
- Dividend yield: 3.55%
The Dow Jones U.S. Dividend 100 Index reflects the U.S. economy’s performance by evaluating its top dividend companies, such as UPS, Pfizer, Coca-Cola, Pepsi, and others. The Schwab U.S. Dividend Equity ETF (SCHD) is something you should buy and hold because of its dedication to closely tracking the Dow Jones 100 index. While not a truly diversified portfolio, you can receive great extra dividend income, which is a significant sign of market strength.
8. Emerging market stocks – Vanguard FTSE Emerging Markets ETF (VWO)
- Expense ratio: 0.10% or $1 annually per $10,000 invested
- One-year return: 20.40% (in 2019)
- Dividend yield: 3.82%
Emerging market countries have shown that many industries can compete in the global arena with their top-notch performance. The FTSE Emerging Markets All Cap China A Inclusion Index monitors emerging market business growth. The Vanguard FTSE Emerging Markets ETF does not closely track the index but takes some samples to hold a diversified collection of well-balanced securities.
9. Small caps – Vanguard Total Stock Market ETF (VTI)
- Expense ratio: 0.03% or $3 annually per $10,000 invested
- One-year return: 30.80% (in 2019)
- Dividend yield: 0.11%
The CRSP U.S. Total Market Index monitors 100% of all investable U.S. stock market businesses of all caps, including micro or startup businesses with regular activity in the New York Stock Exchange and Nasdaq. The Vanguard Total Stock Market ETF (VTI) focuses on taking small-cap samples from the index to create a diversified portfolio. With an affordable expense ratio and exceptional one-year returns, it’s a must-buy and hold ETF for any investor for those unpredictable rainy days.
10. Bonds – iShares Core U.S. Aggregate Bond ETF (AGG)
- Expense ratio: 0.04% or $0.40 annually per $10,000 invested
- One-year return: 8.68% (in 2019)
- Dividend yield: 2.20%
The investment seeks to track the investment results of the Bloomberg Barclays U.S. Aggregate Bond Index. The index measures the performance of the total U.S. investment-grade bond market.
The fund generally invests at least 90% of its net assets in component securities of its underlying index and in investments with economic characteristics that are substantially identical to the economic characteristics of the component securities of its underlying index.
The U.S. investment-grade bond market is volatile yet has demonstrated exceptional growth in the previous years. The Bloomberg Barclays U.S. Aggregate Bond Index monitors the investment-grade market’s performance.
About 90% of iShares Core U.S. Aggregate Bond ETF goes into copying the index’s bond component securities. Bonds are a great safeguard during economic downturns, making this ETF an important buy decision for numerous investors.
Truthfully, numerous investors worldwide minimize their individual stock investments thanks to the dependable and reliable opportunities in exchange-traded funds.
As securities, your ETFs are essentially mutual funds – which comprises stocks, bonds, and other assets. However, unlike most mutual funds, high-quality ETFs focus on particular indexes. For example, the Schwab U.S. Equity Dividend ETF (SCHD) focuses on top-performing U.S. company dividends.
For most investors, they do not expect ETFs to have stellar growth in the next five years. However, they expect them to be the best safety nets against any possible economic downturns or bear markets. Depending on your chosen ETF’s quality, you’ll recoup and preserve the majority of your bull-market investments.
ETFs do not bet for or against the stock market. Most ETFs, such as the ones we’ve listed above, focus on stability and reasonable income. Even the most aggressive exchange-traded funds following and imitating the S&P 500 index, such as the Vanguard S&P 500 ETF (VOO), have relative investment safeguards allowing them to float evenly even during the most disastrous economic downturns.
Therefore, it’s wise to see ETFs as your safeguards allowing you to have higher risk appetites in prospective growth and secondary markets. A wise investor will take calculated risks to grow at any given point.
Check out here the Best Fidelity Mutual Funds for Bear Market.
The majority of ETFs we’ve chosen above are long-term because of their effective bear market shielding and a low-priced barrier to entry. On the other hand, short-term ETFs do exist.
These short-term funds focus on bonds with high-interest rates, allowing them to cash in once all debtors have repaid. Unfortunately, it carries a high risk of debtors defaulting and failing to pay for their debts.
Long-term ETFs focus mostly on having a well-rounded approach depending on their market of focus. On the other hand, short-term ETFs see enormous growth within a quarter, making them a viable option for high-risk appetite investors seeking exponential growth.
With careful research, it’s possible to find the best-quality short-term ETFs in the market that focus on debtors with low credit risk.
For example: The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) focuses on high-quality debtors with a proven track record of debt repayments. In doing so, it has achieved popularity, amassing a significant investor following.
Low-risk appetite investors will always find peace-of-mind and slow-but-sure growth with high-quality long-term ETFs, such as those that we’ve listed above. On the other hand, if you have enough long-term funds on your portfolio, taking some calculated risks with short-term ETFs, as you would with day trading, is always a good portfolio-expanding investment move.
The stock market is more than an exchange center of publicly-available business shares from different local companies. Additionally, it allows investors to obtain share ownership of multinational companies, commodities, and any industry they wish to enter. Investors must have in-depth knowledge regarding market exposure to both well-balanced and risk-aggressive portfolios.
An investor’s market exposure can be correlated and non-correlated. The oil and agricultural industries are different but have a correlation because oil prices affect agricultural goods. Higher oil prices create logistical frictions and obstacles for agricultural industries.
On the other hand, the pharmaceutical industry has no direct correlation with general goods manufacturing industries. The price of medicine does not directly affect the rise or fall of general good values, clearing them of any connection.
An aggressive or well-balanced portfolio identifies these correlations and welcomes or rejects them depending on the investor’s short and long-term goals. Short-term investors may choose to invest most of their resources to correlated industries, enabling them to propel growth at a higher risk of loss. On the other hand, long-term investors wanting a diversified portfolio will want to own non-correlated ETFs
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