Are Boring ETFs The Best Bet This Season?

Billionaire investor George Soros had once said, “If investing is entertaining, if you're having fun, you're probably not making any money. Good investing is boring.” The same can’t hold truer in the current market scenario, thanks to global growth slowdown, geopolitical turmoil and high broad-based volatility in the markets ever since the start of the year.

The latest driver to volatility came in from Britain’s decision to leave the EU, which has had a knock-on effect, driving yields on government bonds to record lows. While rates were already low on a global scale, earlier this month, 10-year note yields dropped to its lowest level in the last three years. Meanwhile, the 10-year UK gilt also touched a record low on challenging outlook and lackluster service sector data. Germany, France, Switzerland and Australia have all seen new lows in yields for their 10-year benchmarks this month. Japan too is in the negative zone (read: Global Treasury Yields Dive: Play These Sector ETFs).

This, in turn, makes high-dividend paying instruments and other investments offering yield look attractive. Apart from yield, investors are also looking for a safer option to guard against volatility. Relatively higher immunity against market peaks and troughs makes some sectors like utility and telecom less volatile than others (read: Utilities ETFs Hit Highs as U.K. Falls Hard).
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Also, market sentiment has been improving recently with encouraging data flowing in from the U.S. and other countries such as China. Currently SPDR S&P 500 ETF (NYSE:SPY) (AX:SPY) is up almost 7% (as of July 15, 2016).

But, volatility is expected to make a comeback with the U.S. elections lined up this year. So let’s look at some utility and telecom sector ETFs which are likely to be in focus for at least the rest of the year (read: Market Fears Brexit: Volatility ETFs Take Full Advantage).

Utility ETFs in Focus (see all Utilities/Infrastructure ETFs here)

Vanguard Utilities ETF VPU – Up 22.4% YTD (as of July 15, 2016); yields 2.91%

Fidelity MSCI Utilities ETF FUTY – Up 22.1% YTD; yields 2.96%

iShares US Utilities IDU – Up over 22.1% YTD; yields 3.39%

Utilities Select Sector SPDR ETF (NYSE:XLU) XLU – Up 22.0% YTD; yields 3.13%

PowerShares DWA Utilities Momentum ETF PUI – Up 23.9% YTD; yields 2.48%

Telecom ETFs in Focus

Vanguard Telecommunication Services ETF (MU:VOX) – Up 22.6% YTD; yields 4.01%

iShares US Telecommunications ETF IYZ – Up 21.6% YTD; yields 1.50%

Fidelity MSCI Telecom Services Index ETF FCOM – Up 23.0% YTD; yields 2.01%

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SPDR-SP 500 TR (SPY): ETF Research Reports

SPDR-UTIL SELS (XLU): ETF Research Reports

PWRSH-DW UTL MO (PUI): ETF Research Reports

VIPERS-UTIL (VPU): ETF Research Reports

FID-TELECOM (FCOM): ETF Research Reports

VIPERS-TELE SVC (VOX): ETF Research Reports

ISHARS-US UTIL (IDU): ETF Research Reports

ISHARS-US TELE (IYZ): ETF Research Reports

FID-UTILITY (FUTY): ETF Research Reports

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Zacks Investment Research