In the current volatile market due to the US-China trade war, Brexit, Fed rate speculations and political instability in many parts of the world, it is prudent to allocate part of your portfolio to defensive ETFs with high dividends. These ETFs have lower downside risk and their dividends act as sweeteners while you wait the improvement of the market condition to start allocating more funds into the higher risk part of your portfolio.
Below are 5 Conservative ETFs with high dividends for you to consider:
- iShares Mortgage Real Estate ETF (REM) REM holds a broad portfolio of residential and commercial mortgage REITs (Real Estate Investment Trust). It’s a narrow, concentrated portfolio, with roughly 2/3 of assets in its top 10 holdings. Investors are interested in REM due to its very high yield, currently over 12%, albeit with a volatile share price. It has over $1.3B of Assets Under Management (AUM) and charges 0.48% fees.
- Invesco KBW Premium Yield Equity REIT (KBWY) KBWY tracks a dividend yield-weighted index of small and mid-cap equity REITs (Real Estate Investment Trust). The fund rejects the traditional cap-weighted methodology in favor of dividend yield-weighting. KBWY also intentionally nixes large cap REITs in favor of smaller capitalization alternatives. This produces a basket that tilts very small—70% small- and microcaps—and also underweights residential REITs in favor of commercial REITs.It has a yield of 9.5% 330M$ AUM and 0.35% expense ratio.
- Reaves Utility Income Fund (UTG)This is actually not an ETF but CEF (Closed-End Fund) providing a high level of after-tax income and total return. The fund intends to invest approximately 80% of its total assets in dividend-paying common and preferred stocks and debt instrument of companies within the utility industry. The remaining 20% is invested in other securities. This fund dividend yield is 6% paid on monthly basis.
- iShares 0-5 Year High Yield Corporate Bond (SHYG) SHYG tracks a market-value-weighted index of high-yield corporate bonds with 0-5 years remaining in maturity. It has a 5.6% yield, AUM of over 3B$ and 0.3% expenses.
- Invesco S&P International Developed Low Volatility (IDLV) IDLV tracks an index of about 200 stocks showing low price volatility pulled from the S&P Developed ex-US and South Korea LargeMid Cap BMI Index. It has a yield of 3.7%, 0.25% expense ratio and 800M$ AUM.
The above ETFS/CEF will help add stability to your portfolio. More importantly, the best strategy to manage the market turbulence is Diversification!
This is why, during my coaching courses, I share with my clients ready to use portfoliosthat follows 5 dimensions of diversifications to not only deliver amazing return (e.g. the “Growth portfolio” delivered 23.5% CAGR (Compound Annual Growth Rate) for the last 7 years) but also protect you any potential downside.
What are you waiting for?! Take action today and start your investment journey