While rotating money out of a high-performing sector into more defensive ones is a good strategy, said Rosenbluth, those who want to protect themselves against the ups and downs of the market can purchase a low-volatility ETF. These funds tend to hold more defensive stocks across several sectors.
The iShares Edge MSCI Min Vol USA ETF (USMV), which Rosenbluth highlights as an appropriate fund for a portfolio, holds companies in technology, health care, consumer staples and financials, among others. Its top five holdings are Pfizer, Visa, McDonalds, Johnson & Johnson and Waste Management. The Invesco S&P 500 Low Volatility ETF (SPLV), which has a higher weighting to utilities than the USMV, is another good option, said Rosenbluth. The two did fall over the last week, by about 3 percent and 1 percent, respectively, but they fared better than the overall market.
Another option is higher-yielding ETFs that have payouts of around 3 percent and 4 percent. While the 10-year Treasury yield has climbed to about 3.2 percent, these funds offer enough income that they’re still attractive to investors. One fund Rosenbluth suggests looking at is the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD), which offers both low-vol and high-yield features. It has a 3.83 percent payout, a 53 percent allocation to noncyclical stocks, such as utilities, real estate and consumer staples, and only fell by 0.65 percent over the last week.
“These ETFs tend to be hold defensive-oriented, dividend-yielding stocks that provide a cushion for investors,” said Rosenbluth. “This is a way that investors can still participate in the equity markets, which will ultimately turn around.”