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Top Sector ETFs Flashing “Defense”
Ron DeLegge, Editor
September 19, 2011
As Europe’s financial crisis rages on, U.S. industry sectors are telling us what’s working and what’s not. Since the beginning of the year, defensive industry sectors are outperforming aggressive sectors. Put another way, defense is in and offense is out.
Here’s a snapshot of three top performing S&P 500 industry sectors year-to-date:
Consumer Staples Sector SPDR (NYSEArca: XLP) +6.54%
The consumer staples sector has been a haven this year, beating the S&P 500 by almost 10%.
The staples sector focuses on companies that produce food, liquor, household and personal products. XLP owns 41 bellwether stocks in the consumer sector like Wal-Mart, Proctor & Gamble, and Coca-Cola.
XLP charges 0.20% annually and dividends are paid quarterly.
Healthcare Select Sector SPDR (NYSEArca: XLV) +5.79%
Companies in the healthcare sector include equipment makers, health care service providers, biotechnology, and pharmaceuticals companies.
XLV has exposure to 52 different healthcare stocks. Among XLV’s largest holdings are healthcare blue chips like Pfizer, Johnson & Johnson, and Abbott Labs.
Besides being an excellent barometer for stock performance in the healthcare sector, XLV has handedly outperformed industry stalwarts like Merck (NYSE: MRK) and Pfizer (NYSE: PFE) over the past five years. It also disproves the false theory that buying individual blue chip stocks produces market beating results.
XLV charges 0.20% annually and dividends are paid quarterly.
Utilities Select Sector SPDR (NYSEArca: XLU) +10.55%
Historically, utility stocks have been owned by investors seeking higher dividend income versus the broader stock market (NYSEArca: VTI).
XLU contains exposure to 33 utility companies within the S&P 500 that produce or distribute electricity and natural gas. The ETF’s top three holdings are Southern Co., Exelon and Dominion Resources and its current dividend yield is 3.97%.
XLU charges 0.20% annually and dividends are paid quarterly.
Something Different
For the people that suffer from indecision, a fund like the ALPS Equal Sector Weight ETF (NYSEArca: EQL) is worth strong consideration. EQL takes each one of the nine S&P 500 sector ETFs and gives them the same 11.1% representation within the overall portfolio. This type of equal weighting of entire industry sectors prevents any particular category from distorting or wielding too much influence on performance.
Over the past year, EQL has increased by 11.01% compared to a 9.56% gain for the S&P 500 (NYSEArca: SPY). EQL charges annual expenses of 0.55%.
Building an all ETF portfolio is a smart strategy and easy with ETFguide’s Ready-to-Go ETF Portfolios. Since the beginning of the year, 4 of 6 portfolios are beating the broader stock market. In the end, good results are possible even during difficult markets and getting the correct investment mix doesn’t happen by accident. |
