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5 ETF Buying Zones on Market Gyrations

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The second wave of coronavirus infections has made investors jittery lately, leading to global stock market gyrations. This is especially true as COVID-19 around the world is resurging after the reopening of economies (read: Worried About Volatility? Invest in These ETFs).

In particular, new coronavirus cases in the United States climbed to their highest level in two months. Florida, Oklahoma and South Carolina reported record increases in new cases on Wednesday. Seven other states reported record highs infections earlier in the week and Australia posted its biggest daily rise in infections in two months. The rise in new infections has sparked off worries that reopening of businesses and economies could be curtailed again, slowing down the current recovery, which is faster than expected.

Additionally, reemergence of trade tension and International Monetary Fund’s (IMF) downgrade to economic growth outlook added to the chaos. Washington is considering new tariffs on $3.1 billion worth of European imports in a move that would broaden a transatlantic dispute over aircraft subsidies, according to the Office of the US Trade Representative. Meanwhile, IMF expects a deeper global recession, with GDP likely to shrink 4.9%, much sharper than the 3.0% contraction predicted in April.

Given the latest economic developments, investors should stash their cash in some safe investing zones. We have highlighted them below and their ETFs:

Gold - SPDR Gold Trust ETF (GLD - Free Report)

Gold is viewed as a safe haven in times of economic or political turmoil. The resurgence in COVID-19 disease and global growth downgrade news has raised the appeal for the bullion as a store of value and hedge against market turmoil. As such, the ultra-popular product tracking this bullion like GLD could be an interesting pick. The fund tracks the price of gold bullion measured in U.S. dollars, and kept in London under the custody of HSBC Bank USA. It is an ultra-popular gold ETF with AUM of $66.5 billion and heavy volume of nearly 12.9 million shares a day. It charges 40 bps in fees per year from investors and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Get Ready for a Gold Rush: ETFs in Focus).

Long-Dated Treasury - iShares 20+ Year Treasury Bond ETF (TLT - Free Report)

The products tracking the long end of the yield curve often provide a safe haven. TLT provides exposure to long-term Treasury bonds by tracking the ICE U.S. Treasury 20+ Year Bond Index. It holds 44 securities in its basket and charges 15 bps in annual fees. TLT is one of the most popular and liquid ETFs in the bond space with AUM of $18.2 billion and average daily volume of 13.1 million shares.

Low Volatility - iShares Edge MSCI Min Vol USA ETF (USMV - Free Report)

These products have the potential to outpace the broader market providing significant protection to the portfolio. These funds include more stable stocks that have experienced the least price movement. Further, these allocate more to defensive sectors that usually have a higher distribution yield than the broader markets. While there are several options, USMV with AUM of $34 billion and average daily volume of 6.2 million shares is the most popular ETF. The fund offers exposure to stocks that have lower volatility characteristics relative to the broader U.S. equity market. It tracks the MSCI USA Minimum Volatility Index, holding 194 stocks in its basket. The product charges 15 bps in annual fees and trades in average daily volume of 6.2 million shares. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

Dividend - Vanguard Dividend Appreciation ETF (VIG - Free Report)

The dividend-paying securities are the major sources of consistent income for investors when returns from the equity market are at risk. This is especially true as these stocks offer the best of both these worlds — safety in the form of payouts and stability in the form of mature companies that are less volatile to large swings in stock prices. The companies that offer dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis. While the dividend space has been crowded, ETFs with stocks having a strong history of dividend growth like VIG seem to be good picks. It holds 225 stocks in its basket with AUM of $42.8 million. The fund trades in volume of 2 million shares a day on average and charges 6 bps in annual fees. It has a Zacks ETF Rank #2 with a Medium risk outlook (read: A Quick Guide to Dividend Aristocrat ETFs).

Long/Short - AGFiQ US Market Neutral Anti-Beta Fund (BTAL - Free Report)

The fund has the potential to generate positive returns regardless of the direction of the stock market as long as low-beta stocks outperform high beta stocks. It invests in low-beta securities and at the same time shorts high-beta stocks of approximately equal dollar amounts within each sector. It seeks to deliver the spread return between low and high-beta stocks. This can easily be done by tracking Dow Jones U.S. Thematic Market Neutral Anti-Beta Index. The ETF has AUM of $156.5 million and an expense ratio of 2.11%. It trades in average daily volume of 219,000 shares.

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