As we move past the first half of September, many investors are wondering if the recent sell-off is over.
many of which now have extremely high price multiples, take center stage. Does it make sense to remain optimistic about these growth stocks? Or is it time to diversify positions, for example through exchange-traded funds (ETFs)?
Let's take a closer look:
The Case for a Balanced Portfolio
Thin summer trading has pushed many stocks to new all-time highs. As we entered September, markets were frothy. We are among those who believe that the recent stock split announcements in (NASDAQ 🙂 and potentially marked a top position in technology stocks – at least for now.
As we prepare to welcome fall, several risk factors should be on your radar. Short-term developments in vaccines and economic data that paint a poor picture can affect investor sentiment on a weekly, if not daily, basis. The lack of another stimulus package to help US consumers is another potential setback.
And let's not forget the upcoming US presidential election. Any possible delay in announcing a winner can easily scare market participants.
Still, we wouldn't encourage long-term investors to panic to sell. Instead, it may be wise to step back and reevaluate portfolios. Depending on the risk / reward profile, it might be appropriate to realize some of the paper gains and trim the overvalued names.
While it can be tempting to load up on the hottest stocks, overexposure to a particular sector can be risky, leading to a virgin ride, especially for retail investors. Instead, a more balanced portfolio can provide protection, especially during times when diversified portfolios are showing their benefits.
While popular names take a break, it may be worth exploring different industries, which can encourage diversification. Against that backdrop, here are our two ETFs for today:
1. Invesco Zacks Multi-Asset Income ETF
Current Price: $ 17.18
52 Week Range: $ 10.95 – $ 23.57
Dividend Yield: 4.11%
Expense Ratio: 0.97% per year, or $ 97 with an investment of $ 10,000
The Invesco Zacks Multi-Asset Income ETF (NYSE 🙂 provides exposure to US listed equities, US certificates paying dividends, real estate mutual funds (), master limited partnerships, closed-end funds as well as preferred shares.
CVY, which has 149 interests, tracks the Zacks Multi-Asset Income index. Both the index and the fund are rebalanced every quarter. In terms of land allocation, the US tops the list with over 85%. The following are Brazil, Japan and Mexico.
The ten largest holdings make up more than 12% of the fund. The top five names are Oasis Midstream Partners (NASDAQ :), Oxford Lane Capital Corp (NASDAQ :), DoubleLine Income Solutions Fund (NYSE :), USA Compression Partners (NYSE 🙂 and Dominion Energy (NYSE :).
So far in the year, CVY is down nearly 27%, but that measure does not include dividend yield. After the March lows, the fund is up more than 50%. In early June, it hit a recent high of $ 18.93. Since then, profit taking has begun, easing the forward P / E and P / B ratios to 15.55 and 1.06, respectively.
Investors who also pay attention to short-term technical analysis may want to know that a drop to the $ 16 level is still possible. Time price analysis suggests the fund may remain under pressure in the short term until the end of November. Long-term investors may want to consider buying the dips.
2. Goldman Sachs Hedge Industry VIP ETF
Current Price: $ 75.87
52 Week Range: $ 41.73 – $ 81.59
Dividend Yield: 0.31%
Expense Ratio: 0.45% per year, or $ 45 with an investment of $ 10,000.
The Goldman Sachs Hedge Industry VIP ETF (NYSE 🙂 provides exposure to fundamentally driven hedge fund managers of the major long stock ideas, as well as a range of dynamic market themes. Contrary to what its name suggests, the fund is not a hedge fund, nor does it invest in hedge funds.
GVIP, which has 50 holdings, tracks the GS Hedge Fund VIP index. The fund describes these companies as " Very-Important-Positions", which are the most common in their top ten long positions in stocks. The fund's top four sectors include information technology (34.1%), communications services (23.9%), consumer discretionary (18.7%) and healthcare (11.5%).
The fund's net assets are nearly $ 112 million, with the top ten holdings accounting for nearly 23% of that figure. Top five names are Salesforce.Com (NYSE :), CrowdStrike Holdings (NASDAQ :), Caesars (NASDAQ :), JD.Com (NASDAQ :), and Tesla (NASDAQ :).
Year-to-date the GVIP is up more than 19%. In fact, it has risen by about 80% since the March low. On September 2, the fund hit a record high of $ 81.59. Respective lagging P / E and P / B ratios of 32.16 and 3.86, as well as short-term technical analysis, suggest a further 5-7% price drop is possible. A drop to $ 72.50 or below would make the fund more attractive to long-term investors.
The Bottom Line
We believe that diversification helps retail investors to become more stable and satisfying. returns in both the short and long term. Other ETFs that may be of interest include:
First Trust Nasdaq Food & Beverage ETF (NASDAQ 🙂
Global X Silver Miners ETF (NYSE :)) (covered)
Global X SuperDividend® REIT ETF (NASDAQ 🙂
Health Care Select Sector SPDR® Fund (NYSE 🙂 (hedged)
Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (NASDAQ 🙂 (covered)
IQ Hedge Multi-Strategy Tracker ETF (NYSE 🙂
iShares Core Moderate Allocation ETF (NYSE 🙂
iShares Global Infrastructure ETF (NASDAQ 🙂 (covered)
Global X NASDAQ 100 Covered Call ETF (NASDAQ 🙂 (covered)
SPDR® Gold Shares (NYSE 🙂 (covered)
VanEck Vectors Pharmaceutical ETF (NASDAQ 🙂
Vanguard Dividend Appreciation Index ETF (NYSE :)) (covered here)
Vanguard Total International Stock Index Fund ETF Shares (NASDAQ 🙂
We plan to revisit the topic of diversification in the coming weeks.