These are the 3 ETFs from the most stable sectors in the world
Passive investments are often associated with a defensive strategy and nature. That's why today we're going to look at three sectors that are generally considered highly defensive and the ETFs you can use to invest in these sectors and industries.
The sectors probably won't come as a big surprise to many of you. They are the consumer staples, health care and materials sectors. And now to the individual representatives!
Consumer staples - First Trust Nasdaq Retail ETF $FTXD
The First Trust Nasdaq Retail ETF is an actively managed exchange traded fund that tracks the performance of the Nasdaq US Smart Retail Index. This index includes approximately 30 companies engaged in the retail and consumer staples business.
Other companies included include retailers specializing in apparel, electronics, toys or sporting goods. The ETF focuses primarily on U.S. companies, but also includes several international companies.
In terms of performance, the ETF does not outperform the broader market. Since launching in 2016, it has provided a total return of around 72%, while the S&P 500 has risen more than 100% over the same time. On the other hand, there is an advantage to that very defensiveness.
The ETF has relatively low expenses of 0.60% per year, which is competitive with other retail-focused funds. It is a good way to diversify risk among different retail chains, even though it offers lower potential returns than some other sectors. Its resilience to the economic cycle is also an attractive feature.
iShares U.S. Healthcare Providers ETF $IHF+0.5%
The iShares U.S. Healthcare Providers ETF is an actively managed exchange traded fund that provides exposure to U.S. companies operating in the healthcare sector. It tracks the performance of the Dow Jones U.S. Select Medical Equipment & Services Index , which includes companies involved in the healthcare, health insurance, equipment and facilities, services, pharmaceutical and biomedical industries.
The fund's top positions include companies such as UnitedHealth Group, CVS Health, Cigna and Abbott Laboratories. The fund invests primarily in healthcare companies such as providers, insurance companies, medical devices and pharmaceuticals, so it offers broad exposure to the U.S. healthcare industry.
This fund has been in existence since 2002. Over the past 10 years, it has delivered a total return of nearly 250%, roughly in line with the broader market. Its returns have essentially tracked the performance of the S&P 500 index.
IHF has relatively low expenses of 0.39% per year, which is lower than the average for exchange traded funds. Its investments in stable healthcare companies provide it with some resilience to economic cycles, although there is higher regulatory risk than in other sectors. Overall, therefore, it represents a good diversification option for investors seeking exposure to the healthcare sector.
Materials Select Sector SPDR Fund $XLB+0.9%
The Materials Select Sector SPDR Fund is a passively managed exchange traded fund that provides exposure to companies in the materials world. It tracks the performance of the Materials Select Sector Index, which includes companies in the chemical, construction, metals and minerals, paper, forestry, and manufacturing sectors.
Major positions in this fund include Linde, Air Products and Chemicals, Sherwin-Williams and Nucor. It focuses primarily on U.S. companies operating in the materials sector.
This fund has been in existence since 1998 and has delivered a total return of approximately 150% during that time. Over the past 10 years, it has provided a total return of about 75%, far below the S&P 500 average. The materials sector is more important for dividend-seeking investors than for growth, as it yields around 2%.
The fund has very low expenses of just 0.13% per year. Its returns tend to exhibit slightly higher volatility than the broader market. Investments in the materials sector are relatively resilient to economic cycles, although they are more sensitive to commodity price fluctuations.
Overall, therefore, the Materials Select Sector SPDR Fund provides diversified exposure to companies across the materials supply chain. It offers a combination of resilience, low costs and dividend yield, albeit with less upside potential than the broader market.
Disclaimer: This is in no way an investment recommendation. It is purely my summary and analysis based on data from the internet and other sources. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.
