ETFs For The Brave: Are These High-Octane Funds Your Best Bet To Ride An Upward Market Swing?
Chandrima Sanyal 1 year ago
Broad U.S. Equity ETFsETFs
Certain ETFs are best suited for when markets are rebounding, while others, like Invesco QQQ Trust, are for those who prefer to play it safe.
When markets are volatile like these days, high-beta ETFs and high-momentum ETFs provide huge opportunities if you have the stomach for the whipsaws.
Beta gauges a stock’s sensitivity to market action. A high-beta ETF invests in shares that tend to move more dramatically than the overall market. That is, they tend to perform better in a rally but drop harder in a decline. These funds can be highly useful for the risk-on investor during the rebound phase.
High momentum ETFs focus on stocks recently showing a strong price uptick. The rationale is based on the idea that winners tend to keep winning. These ETFs are best suited for bullish or trending market conditions.
Also Read: ETF, Equity Trading Access Goes Live On Kraken As Platform Enters Traditional Markets
Here are some top-performing ETFs worth taking a closer look at:
- Invesco S&P 500 High Beta ETF (NYSE:SPHB): Follows the 100 highest beta stocks in the S&P 500, which makes it one of the most popular funds to use when markets are rebounding.
- iShares MSCI USA Momentum Factor ETF (MTUM): Targets U.S. stocks with high recent returns, picking up on positive trends across industries.
- Invesco Dorsey Wright Momentum ETF (NASDAQ:PDP): Applies a relative strength strategy to choose the best performers—a good one for trend-followers who desire market leader exposure.
Yet, if you want to play it safe:
- Invesco QQQ Trust (NASDAQ:QQQ) provides broad market exposure with a long-term growth focus.
- Consumer Staples Select Sector SPDR ETF (NYSE:XLP) is a defensive investment, giving stability from businesses whose products are still in demand during all economic times.
Market Recap: Bounce Or Just A Breather?
Wall Street continued to be volatile due to tariff uncertainty. At last check Monday, the Dow increased 0.78%, the Nasdaq gained 0.64%, and the S&P 500 added 0.79%. Yet all three indexes fluctuated between gains and losses throughout the session—a reflection of the fragile sentiment among investors. All the indexes have inched down by less than 1% by Tuesday afternoon.
President Donald Trump temporarily exempted some tech products from new tariffs and pledged to “help” automakers, following a recent 25% tariff. This sent shares higher.
Adding to the cheer, the CBOE Volatility Index (VIX), Wall Street’s gauge of fear, fell 3% as of today, making equities a little more attractive.
Yet, the bigger picture is conflicted. Since the April 2 tariff shock, the major indexes are 4–5% below where they stood.
Read Next:
Image: Shutterstock