Are Boring ETFs the Best Bet This Season?

Zacks Equity Research Published on July 19, 2016

Billionaire investor George Soros had once said, “If investing is entertaining, if you're having fun, you're probably not making any money. Good investing is boring.” The same can’t hold truer in the current market scenario, thanks to global growth slowdown, geopolitical turmoil and high broad-based volatility in the markets ever since the start of the year.

The latest driver to volatility came in from Britain’s decision to leave the EU, which has had a knock-on effect, driving yields on government bonds to record lows. While rates were already low on a global scale, earlier this month, 10-year note yields dropped to its lowest level in the last three years. Meanwhile, the 10-year UK gilt also touched a record low on challenging outlook and lackluster service sector data. Germany, France, Switzerland and Australia have all seen new lows in yields for their 10-year benchmarks this month. Japan too is in the negative zone (read: Global Treasury Yields Dive: Play These Sector ETFs).

This, in turn, makes high-dividend paying instruments and other investments offering yield look attractive. Apart from yield, investors are also looking for a safer option to guard against volatility. Relatively higher immunity against market peaks and troughs makes some sectors like utility and telecom less volatile than others (read: Utilities ETFs Hit Highs as U.K. Falls Hard).

Also, market sentiment has been improving recently with encouraging data flowing in from the U.S. and other countries such as China. Currently SPDR S&P 500 ETF (SPY - Free Report) is up almost 7% (as of July 15, 2016).

But, volatility is expected to make a comeback with the U.S. elections lined up this year. So let’s look at some utility and telecom sector ETFs which are likely to be in focus for at least the rest of the year (read: Market Fears Brexit: Volatility ETFs Take Full Advantage).

Utility ETFs in Focus (see all Utilities/Infrastructure ETFs here)

Vanguard Utilities ETF (VPU - Free Report) – Up 22.4% YTD (as of July 15, 2016); yields 2.91%

Fidelity MSCI Utilities ETF (FUTY - Free Report) – Up 22.1% YTD; yields 2.96%

iShares US Utilities (IDU - Free Report) – Up over 22.1% YTD; yields 3.39%

Utilities Select Sector SPDR ETF (XLU - Free Report) – Up 22.0% YTD; yields 3.13%

PowerShares DWA Utilities Momentum ETF (PUI - Free Report) – Up 23.9% YTD; yields 2.48%

Telecom ETFs in Focus

Vanguard Telecommunication Services ETF (VOX - Free Report) – Up 22.6% YTD; yields 4.01%

iShares US Telecommunications ETF (IYZ - Free Report) – Up 21.6% YTD; yields 1.50%

Fidelity MSCI Telecom Services Index ETF (FCOM - Free Report) – Up 23.0% YTD; yields 2.01%

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