Although betting on a single company often yields the highest rewards, a basket of exchange-traded funds (ETFs) could give your portfolio the widest surface area possible.
United States Oil Fund (USO): With the hydrocarbon sector one of the few viable ones, USO is one of the best ETFs to buy now.
Vanguard Utilities Index Fund ETF (VPU): When facing trouble, you can’t go wrong with utilities, thus making VPU one of the best ETFs to buy now.
iShares U.S. Insurance ETF (IAK): IAK is tied to companies that provide peace of mind to their clients.
SPDR Gold Trust (GLD): Because gold has long represented a safe-haven asset, GLD may come in handy again.
Consumer Staples Select Sector SPDR Fund (XLP): Given that a recession may be over the horizon, the XLP ETF gives you broad exposure to the necessities.
SPDR S&P Dividend ETF (SDY): Featuring a healthy dose of some of the most reliable companies around, SDY is one of the best ETFs to buy for relative safety.
iShares U.S. Aerospace & Defense ETF (ITA): A highly cynical idea, rising tensions in eastern Europe may bode well for ITA, presenting a case for best ETFs to buy now.
When you hear market experts discuss profitable ideas, they’re usually speaking about individual companies as a singular wager that can often yield the most upside (when guessed correctly). However, during volatile periods, such as this present juncture, the exchange-traded fund (ETF) may be preferable as it spreads risk across a basket of stocks. Still, the best ETFs to buy now will differ depending on your objectives.
For those seeking safety and some measure of comfort — and evidence indicates that’s quite a lot of you — a focus on relevant ideas should be your top priority. Since we’re going through a cycle where most market subsegments are severely challenged, you want to spend your time with proven or likely winners. Therefore, pressing concerns, such as oil, represent solid ideas for best ETFs to buy now.
Also, it’s helpful to consider the tried-and-true sectors for survival during recessionary periods. To my knowledge, no one has yet declared this juncture a recession. However, such calls aren’t made until after the brunt of the damage has been inflicted. Thus, it’s time to plan for the best ETFs to buy now.
Here are my top seven picks for best ETFs to buy now:
United States Oil Fund
Vanguard Utilities Index Fund
iShares U.S. Insurance ETF
SPDR Gold Shares
Consumer Staples Select Sector SPDR Fund
SPDR S&P Dividend ETF
iShares U.S. Aerospace & Defense ETF
Best ETFs to Buy Now: United States Oil Fund (USO)
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Although it’s not a popular topic — especially right now with soaring gasoline prices — the hydrocarbon industry is making a killing this year. Given the circumstances that have fueled this rally, it’s best not to fight the tape. Therefore, I’m going to give top spot for best ETFs to buy now to the United States Oil Fund (NYSEARCA:USO).
You can just look at the performance of this bad boy. Up 50% on a year-to-date (YTD) basis, it is absolutely destroying the benchmark SPDR S&P 500 ETF Trust (NYSEARCA:SPY), which is down 15% during the aforementioned period. Of course, technical considerations represent just one component of USO stock.
The other factor — the much more important one — is the painful combination of soaring inflation and Russia’s unprovoked attack against Ukraine. It’s the “perfect” catalyst that has accelerated a sudden loss of global oil supplies and the situation does not appear poised to improve anytime soon.
Vanguard Utilities Index Fund ETF (VPU)
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I’m going to be blunt. Following up on the act performed by the USO fund is not an enviable task, as demonstrated by the Vanguard Utilities Index Fund ETF (NYSEARCA:VPU). During the early morning hours of the May 19 session, VPU is about half-a-percent below parity on a YTD basis. Admittedly, that’s not an inspiring statistic.
Well, 2022 has hardly been inspiring, so there’s that. But investors seeking the best ETFs to buy now for safety are also likely to have a longer-term perspective. On that note, VPU is a viable candidate because of its core relevancy. As confirmed through academic research, bad things happen when people flip the switch and the light doesn’t turn on.
Put another way, the underlying utility stocks are permanently relevant. You can yell and scream all you want about societal innovations like blockchain and the metaverse. These innovations require power, so you may want to consider plugging yourself into VPU stock.
Best ETFs to Buy Now: iShares U.S. Insurance ETF (IAK)
Ordinarily, unless you’re retired or on the verge of being so, you don’t want to invest too heavily in boring categories like insurance stocks. Sure, they provide incredible safety — relatively speaking to the inherent risks of the capital markets — but they may also be too safe. However, boring is good during rough times and I can’t think of a more boring fund than the iShares U.S. Insurance ETF (NYSEARCA:IAK).
If you want the absolute literal version of this article’s headline, go with IAK stock. During the morning hours of May 19, IAK has gained 0.8% YTD. It’s such an uninspiring stat, but at the same time, it’s a stat you can depend upon. Even during recessionary periods, people won’t want to let go of their insurance policies because the devastation of going without during an unexpected incident could be catastrophic.
Further, an environment of rising interest rates should benefit insurance stocks. The monetary dynamics between longer-term assets and shorter-term liabilities favor insurers, making IAK one of the best ETFs to buy now for safety.
SPDR Gold Trust (GLD)
Another frank disclosure must be made before moving forward with the next idea for best ETFs to buy now: precious metals have been brutally disappointing this year. If you don’t believe me, just look at the SPDR Gold Trust (NYSEARCA:GLD). On a trailing month basis, GLD has declined by over 5%, which is odd. You’d think with soaring inflation, the ETF would at least be in positive territory, if not robustly so.
Part of the reason for the odd trading in GLD is the balance that the Federal Reserve (Fed) is striking. Yes, inflation is up and more so than many analysts expected. At the same time, the Fed has also declared that it’s very concerned about rising prices. Therefore, it will presumably act aggressively with higher benchmark interest rates, which is deflationary.
Still, on a YTD basis, GLD is up over 2%. It’s quite possible that even without the inflationary catalyst, the fear trade component could help gold-related investments.
Best ETFs to Buy Now: Consumer Staples Select Sector SPDR Fund (XLP)
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As mentioned earlier, boring is good during a recessionary cycle. Even though few want to accept this condition — honestly, it’s bad for business — it’s probably better to do so earlier, that way you can plan ahead for the worst. If the pessimism does turn out to be warranted, you’ll be glad to have some exposure to the Consumer Staples Select Sector SPDR Fund (NYSEARCA:XLP).
As the name suggests, the XLP is one of the best ETFs to buy now because you’re dealing with core household necessities. From personal care to beauty to food and beverages, the core holdings undergirding the XLP covers everything that families need. In addition, the ETF has a touch of vice with the inclusion of major tobacco stocks.
Unfortunately, because several companies reported alarming earnings disclosures — particularly from the big-box retailers — the XLP is hurting, down about 8% YTD. However, as we move forward in this “new” new normal, the resilience of the consumer staples segment should make XLP one of the best ETFs to buy now.
SPDR S&P Dividend ETF (SDY)
For those seeking exposure to passive income opportunities, the SPDR S&P Dividend ETF (NYSEARCA:SDY) may be a name to keep close on your watch list. For one thing, companies that pay dividends tend to perform better than those geared entirely for growth. The latter tends to have aspirational elements in their business models while the former are usually proven entities.
Another factor to consider, of course, is inflation. With the purchasing power of the U.S. dollar declining rapidly over the trailing year, many households must focus on protecting their wealth in real terms as opposed to nominal. One of the most convenient ways to do this is to focus on dividends. Generally, powerful blue chips offer a reliable yield and that’s what SDY delivers.
To be fair, SDY’s core holdings include myriad companies that have disclosed upsetting earnings reports, which initially has Wall Street concerned. Nevertheless, over the long run, the main benefits of the SDY should become very apparent.
Best ETFs to Buy Now: iShares U.S. Aerospace & Defense ETF (ITA)
To be completely upfront, the iShares U.S. Aerospace & Defense ETF (NYSEARCA:ITA) is not most folks’ idea of the best ETFs to buy now for safety. It’s not exactly safe, especially when you factor in the 6% loss on a YTD basis. Nor is it a comforting investment; indeed, it’s downright cynical. Still, there’s a time for war and a time for peace — and neglecting to prepare for the former won’t bring about the latter.
In that context, ITA may be one of the names to consider among the best ETFs to buy, but only for the speculative portion of your portfolio. Naturally, driving the narrative for the ITA is the conflict in Ukraine, with western powers committed to not only supporting the embattled nation militarily, but also in rebuilding its infrastructure once the bloodshed is over.
From a practical standpoint, a bolstered defense industry can help end the war quickly, as well as inflict generational damage on Russia’s ability to unnecessarily upset the hard-earned stability of the modern global order. That might be a win-win across the board.
On the date of publication, Josh Enomoto 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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