Jumpy market sentiment has led to an increase in investors searching for the best exchange-traded funds (ETFs) to buy for safety from further declines. Low-risk investors are striving for a safe haven in a market crushed by numerous worries that dampen the mood in broader markets.
The Wall Street Journal recently reported that according to Morningstar data, ETFs that track the consumer staples, utilities, real estate, healthcare, precious metals, Treasuries, and commodities have attracted a total of $50 billion in net inflows year-to-date (YTD) through April. Put another way, investors are not necessarily leaving the market, but rather moving to defensive industries.
ETFs focused on the consumer staples and healthcare sectors have particularly seen some of the largest inflows in recent times. For example, the Consumer Staples Select Sector SPDR Fund’s (NYSEARCA:XLP) net inflow of $1.25 billion over April was the highest since January. Moreover, the Health Care Select Sector SPDR Fund (NYSEARCA:XLV) attracted $1.7 billion over April, the highest inflow since July 2021.
With that information, here are the three best ETFs to buy for low-risk investors seeking safe plays in a volatile stock market.
|XLP||Consumer Staples Select Sector SPDR Fund||$74.99|
|SOXX||iShares Semiconductor ETF||$428.34|
|RSP||Invesco S&P 500 Equal Weight ETF||$150.34|
Best ETFs to Buy: Consumer Staples Select Sector SPDR Fund (XLP)
52-week range: $68.32 – $81.34
Dividend yield: 2.90%
Expense ratio: 0.10% per year
The Consumer Staples Select Sector SPDR Fund provides exposure to a wide range of businesses ranging from manufacturers and retailers of food, beverages, household and personal items, and tobacco.
In terms of sectoral allocations, we see beverages leading at 26.42%, followed by household products at 23.59%, food products at 19.28%, and food & staples retailing at 18.01%.
The top 10 holdings account for around 70% of its net assets of $15.58 billion. In other words, it is a top heavy fund. Among them are Procter & Gamble (NYSE:PG), Coca Cola (NYSE:KO), PepsiCo (NASDAQ:PEP), Costco Wholesale (NASDAQ:COST) and Philip Morris International (NYSE:PM).
XLP has returned 3% over the past 12 months but has declined almost 5% year-to-date (YTD). The fund has a trailing price-to-earnings (P/E) ratio of 26.28x and a price-to-book (P/B) ratio of 5.38x. We believe the share price declines in some of the names in the fund review a good entry point into this consumer-centric fund.
iShares Semiconductor ETF (SOXX)
52-week range: $377.33 – $559.02
Dividend yield: 0.90%
Expense ratio: 0.43% per year
Our next choice centers on the the semiconductor industry, where chip shares have already come under significant pressure in 2022. The closely followed PHLX Semiconductor Index has lost roughly 28% over the past five months.
However, the sector is healthy and growing fast. For instance, recent metrics from McKinsey suggest, “The semiconductor industry, which makes vital components for the technologies we all depend on… is poised for a decade of growth and is projected to become a trillion-dollar industry by 2030.”
Therefore, the iShares Semiconductor ETF (NASDAQ:SOXX), which provides access to 30 leading U.S. semiconductor companies, may look as a contrarian yet solid choice while Wall Street bleeds. The semiconductor industry is at the center of artificial intelligence (AI), clean energy, electric vehicles (EVs), the Internet of Things (IoT), machine learning, and robotics—segments all leading to a high chip demand.
SOXX was launched in July 2001. With regards to sub-sectors, it is heavily tilted toward semiconductors at 78.79%, followed by semiconductor equipment at 21.01%. The top 10 stocks in the portfolio account for 57% of its net assets of $7.23 billion.
Since the start of the year, SOXX has tumbled around 28% and hit a 52-week low in May. Nevertheless, the fund offers a good investment alternative for prominent semiconductor stocks. Lastly, the fund’s trailing P/E and P/B ratios of 21.37x and 5.16x, respectively.
Best ETFs to Buy: Invesco S&P 500 Equal Weight ETF (RSP)
52-Week Range: $138.12 – $164.90
Dividend Yield: 1.48%
Expense Ratio: 0.20% per year
The S&P 500 index is possibly the most important gauge of performance on Wall Street. The 500 companies included in the index comprise around 80% of the overall stock market stateside, covering all industries.
Within the S&P 500, large-capitalization (cap) businesses make up a larger slice of the value of the index, influencing its performance. With a market cap of around $2.3 trillion, right now Apple (NASDAQ:AAPL) tops the S&P 500 list.
It provides exposure to S&P 500 companies with an equally-weighted approach. The fund started trading in April 2003.
Information technology leads the sectors with (15.35%), followed by industrials (14.44%) health care (13.03%), and financials (13.30%).
The top 10 holdings account for less than 3% of its net assets of over $31 billion. Among the top stocks are digital transformation services provider Epam Systems (NYSE:EPAM); data analytics company Nielsen Holdings (NYSE:NLSN); fuels and petrochemical products manufacturer Valero Energy (NYSE:VLO), frozen potato products producer Lamb Weston Holdings (NYSE:LW), and specialty chemicals producer Albemarle (NYSE:ALB).
RSP has declined about 12% YTD and recently hit a 52-week low. Trailing P/E and P/B ratios are at 19.72x and 3.19x, respectively.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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