Beat The Market With These 3 Great ETFs
Zacks Investment Research | Jan 27, 2015 02:03AM ET
The year 2015 has already seen many market mood swings. Heightened volatility and flight to safety suggest that investors are nervous about the prospects for global economic growth this year. A weak start to the fourth quarter earnings season and the uncertain political situation in Greece have further added to investor fears. Despite somewhat shaky start, there are many reasons to believe that the bull market for stocks remains intact this year.
h3 Strong U.S. Economic Growth despite Global Weakness/h3
The U.S. economy is growing at the fastest clip in a decade while growth in many other parts of the world remains sluggish. Most economic data points have confirmed this trend. While there was some nervousness in the market after the Retail Sales data for December, I believe investors should not read too much into a single month’s number when the year-over-year trends are very impressive. (Read: Oil yet to find bottom, go short with these ETFs )
Academic research shows that high quality companies—as determined by factors such as high earnings quality and low leverage-- consistently deliver better risk adjusted returns than the broader market over long term. An easy way of investing in such stocks is via ETFs that focus on such “high-quality” stocks. Such stocks usually have an excellent earnings record and strong balance sheets. These stocks also hold up rather well during market swings.
h3iShares MSCI USA Quality Factor ETF (NYSE:QUAL - ETF report )
The ETF uses a proprietary model that includes factors like profitability, management efficiency and cash flow. Firms are selected for inclusion in the index based on expected dividend payments and long-term capital growth potential.
Financials currently take the top spot with about 18% of assets, followed by Information Technology (17%), and Consumer Discretionary (12%). Top holding Apple accounts for just 4.4% of the asset base.
QDF has a nice dividend yield of 2.5% while the expense ratio is modest at 38 basis points.
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