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Bears Creep In: ETF Strategies to Win

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After a superb August, Wall Street has been facing occasional troubles in September. This is especially true given its ill-famed seasonality in the equity market.

September is historically the worst month of the year for stocks. According to moneychimp.com, a consensus carried out from 1950 to 2019 has revealed that September ended up offering positive returns in 32 years and negative returns in 38 years, with an average return of negative 0.57%, which is worse than any month.

Terrifying financial events like the start of the Great Depression in 1929 or the fall of Lehman Brothers in 2008 all crept up in the month of September. It looks like this September is also not different. Overvaluation concerns and doubts over the faster rollout of vaccines resulted in such selloffs.

While the broader market tried to gain some footing last week on coronavirus vaccine and treatment hopes, rising coronavirus cases in the United States and Europe, and “allegations of major banks engaging in transferring illicit funds over decades” once again started to weigh on investors’ sentiments to start the week.

Notably, there has been a significant rise in new COVID-19 cases in Arkansas, Colorado, Idaho, Montana, Nebraska and North Dakota over the past week.The S&P 500 registered daily losses for four consecutive days for first time since February and is down more than 6% in September, per CNBC.

Consumer Staples Should Stand Out

Staples is the non-cyclical space of the broader consumer sector, and should do well in a turbulent market. This makes Consumer Staples Select Sector SPDR Fund (XLP - Free Report) a good pick if volatility flares up (read: 5 Industry ETFs Set to Beat Slowing Retail Sales).

Keep Trying Technology With a Focus on Dividends

More coronavirus casesmean more uncertainty in health emergency and related economic recovery. This also ensures a prolonged period of social distancing norms and continued surge in digitization. No doubt, the Nasdaq had been a high-flying index this year, but the latest correction will help investors to dip their toes in the index and its tech components.

In short, technology players with flair of dividends should help investors to gain in these trying times. First Trust NASDAQ Technology Dividend Index Fund (TDIV - Free Report) , which yields 2.25% annually, can be a given a look. Investors can also focus on Vanguard Information Tech ETF (VGT - Free Report) as the fund is heavy on recent dividend hikers like Apple AAPL and Microsoft MSFT. One analyst noted that the ETF’s dividend payout witnessed a CAGR of 19.5% in the past three months.

Multi Asset ETFs Act As a Good Hedge        

We would also like to pick a full-fledged defensive ETF like iShares S&P Moderate Allocation Fund (AOM - Free Report) . The fund takes a fund-of-funds approach and is a combination of bonds and global stocks. Fixed income makes up about 54.4% of the fund followed by 44.9% in equities. The United States accounts for about 63.5% of the portfolio, while Japan (4.75%) and China (3.86%) take the next two spots. The fund yields about 2.32% annually.

Have Faith on Low-Volatility ETFs

Low-volatility ETFs could be a solution to the present scenario where risk-on sentiments can be accessed in a measured manner. iShares Edge MSCI Min Vol USA ETF (USMV - Free Report) is composed of U.S. equities that have lower volatility characteristics relative to the broader U.S. equity market. Information Technology, Health Care, Consumer Staples and Financials have a double-digit weight in the fund(read: Why Is This the Right Time to Invest in Low-Volatility ETFs?).

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