Investors Flock to Defensive ETFs Amid Market Valuation Concerns
The stock market has been experiencing high valuation, with the cyclically adjusted price-to-earnings (CAPE) ratio at 41.4, close to an all-time high of 44 reached in 1999. This has raised concerns among investors about a potential crash or correction. However, rather than timing the market, investors can consider investing in exchange-traded funds (ETFs) that are designed to perform well in bear markets.
The Vanguard Health Care Index Fund ETF (VHT) is one such example, holding 417 stocks, including Eli Lilly, Johnson & Johnson, and UnitedHealth Group. Its annual fee is low at 0.09%, and its dividend yield was recently 1.5%. This fund's defensive nature makes it an attractive option for investors looking to weather a market downturn.
Other ETFs worth considering include the State Street Utilities Select Sector SPDR ETF (XLU), which focuses on utility-related companies, such as NextEra Energy and Southern Co., with a low annual fee of 0.08% and a dividend yield of 2.8%. The Vanguard Consumer Staples Index Fund ETF Shares (VDC) specializes in consumer staples companies, including Walmart and Procter & Gamble, with an annual fee of 0.09% and a recent dividend yield of 2.1%