ETF Investments for Uncertain Future

After the recent economic recession, many traders are reluctant to risk their money as much as they were doing in the past. Most traders now tend to place the safety of invested money over ROI. Being diversified, liquid and traded like stocks, exchange traded funds (ETFs) would make safer investments. Traders can follow different strategies for this purpose.

Investing in ETFs that track specific sectors/industries is a popular option. Different sectors respond differently to economic changes; cyclic sectors such as transportation, financial and technology are more vulnerable to economic changes compared to defensive sectors such as utilities and consumer staples. The various cyclic sector stocks themselves react differently to news and changes; for instance, the healthcare sector comprising many pharmaceutical companies is considered safer than other sectors. Thus ETFs which are tracking these safer sectors can be good investments for future uncertainties.

Investing in ETFs tracking certain commodities, currencies or bonds is another option. Diversified ETFs which track a range of different currency pairs or currency indexes can turn out to be good investments. One can also find many commodity/bond ETFs which track some least volatile commodities and bonds. The downside of investing in these (least volatile) ETFs is the reduced portfolio returns. Besides, investing in them does not ensure profit, as they too can fall when bad news arrive.

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