Skip to main content

7 ETFs for a Solid Portfolio Defense

By U.S. News & World Report

Exchange-traded funds that offer protection.

Think it’s silly to think about portfolio defense when the market is at all-time highs? Well, talk to investors who were fully long in mid-2000 and late 2007 and ask them if they had any regrets. Don’t get caught flat-footed; the following exchange-traded funds will help you play a little defense in the event the market gets rocky.

Vanguard Short-Term Bond ETF (ticker: BSV)

The Vanguard Short-Term Bond ETF is one of the safest funds you can park your money in just about any kind of environment. BSV invests in Treasurys, investment-grade and other high-quality bonds with short maturities between one and five years, making it resilient against interest-rate hikes. The fund is extremely stable, trading in a tight range between about $82 and $79.25 since 2010. And don’t let a potential June rate hike scare you off — BSV is up fractionally since the Fed first raised rates Dec. 14. You won’t make much, at just a 1.4 percent yield; BSV is merely a place to park your cash.

Expenses: 0.07 percent, or $7 annually per $10,000 invested

iShares 20+ Year Treasury Bond ETF (TLT)

The TLT, which invests in U.S. Treasurys with maturities of more than 20 years, carries more interest-rate risk than BSV. After all, its average duration of more than 17 years is far higher than BSV’s average of three years. However, TLT also is about 5 percent higher since mid-December despite two interest-rate hikes and Wall Street’s confidence in a June rate hike. Meanwhile, should markets start to quake this summer, investors going risk-off will be looking to pile into TLT for its more substantial 2.8 percent SEC yield — which means anyone already in the fund could enjoy a double whammy of capital gains and income.

Expenses: 0.15 percent

Guggenheim Defensive Equity ETF (DEF)

If you prefer to stay mostly invested in equities, you can opt for Guggenheim’s subtly named Defensive Equity ETF, which is literally focused on investing in sectors and individual stocks that perform well when the market slides. DEF’s holdings are selected by three factors: “beta, downmarket volatility and required revenue growth probability scores.” That results in a fairly balanced fund that’s heaviest in consumer discretionary stocks like McDonald’s Corp. (MCD), financials such as Aon PLC (AON) and tech stocks including Alphabet (GOOG, GOOGL). Completing this fund’s protective nature is an equal-weighting methodology that keeps all 100 holdings at roughly 1 percent of the fund’s assets.

Expenses: 0.6 percent (includes 1-basis-point fee waiver)

Fidelity MSCI Health Care Index (FHLC)

Every investor knows by memory the defensive sectors you’re supposed to pile into when the going gets tough: utilities, health care and consumer staples. But in a risk-off environment, value will matter, too — and health care wins that battle decisively with a mere 15.5 forward price-earnings ratio compared to 20.1 for consumer staples and 17.6 for utilities. Fidelity’s FHLC is an inexpensive way to invest in the space, providing access to standard health care fare such as pharma, biotech, equipment and care providers. Top holdings include stalwarts such as Johnson & Johnson (JNJ), Pfizer (PFE) and UnitedHealth Group (UNH).

Expenses: 0.084 percent

PowerShares S&P 500 High Dividend Low Volatility ETF (SPHD)

While you might want to get defensive, there’s always the possibility that the bull market keeps slowly trudging higher through the summer months, continuing to defy gravity. PowerShares’ SPHD is the perfect fund, then, for those who want to protect against downside but still be able to capture upside. For instance, since the start of 2016, the Standard & Poor’s 500 index has advanced more than 17 percent, but the SPHD has climbed nearly 20 percent in that time. This ETF is heavy in utilities (22.5 percent), real estate (18.5 percent) and consumer staples (11 percent), and a 12-month distribution rate of 3.9 percent.

Expenses: 0.3 percent

PowerShares Preferred Stock ETF (PGX)

If you’re looking for shelter that provides high income, you’d do well to consider preferred stocks — those stock-bond “hybrids” that rarely offer much in the way of capital gains, but can throw off yields between 5 and 7 percent. PowerShares’ PGX is a collection of 252 such preferred shares with a roughly 60-40 mix of investment- and non-investment-grade. Like most preferred-stock funds, PGX is heavily overweighted in financials (75 percent), with notable allocations in utilities and real estate (8 percent) as well. PGX tends to trade in a tight range, so don’t expect much in gains; what you want here is protection, and PGX’s 5.6 percent SEC yield.

Expenses: 0.5 percent

ProShares Short S&P500 ETF (SH)

ProShares’ SH is perhaps the best market hedge for everyday investors. SH provides the inverse of the daily performance of the S&P 500, so if the S&P 500 loses 1 percent, SH should gain 1 percent, minus fees. That tends to “wiggle” a bit over time (the SH is down 30.6 percent over the past three years while the SPY is up 27.48 percent), but it’s still pretty faithful, and it’s not as dangerous as some 3x leveraged fund. If you think the market is in for a short-term fall, don’t sell your long positions — just buy SH and get some upside from the market’s temporary downside.

Expenses: 0.89 percent

More from U.S. News

9 ETFs to Buy When the Market Tanks

The 10 Best ETFs for Value Investors

8 ETFs for Investors Who Love Value

7 ETFs for a Solid Portfolio Defense originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
Read Next Story

Related News

Virginia Tech slips Saint Louis to advance to second round

VCU falls to UCF in first round of NCAA Tournament

‘Jeopardy!’ host Alex Trebek announces pancreatic cancer diagnosis