In an era marked by market volatility, risk-averse investors are in search of safer harbors. Traditional stocks and bonds are staples of any diversified portfolio. This may not always meet the low-risk criteria. This is what many seek during tumultuous economic times.
This is where alternative investment ETFs come into play. It offers a unique blend of potential rewards with mitigated risks. Below, we explore the top alternative investment ETFs. This caters to the conservative investor. It aims for a balance between growth and financial security. Let’s get started!
Gold and Precious Metals ETFs
Gold has long been regarded as a haven in times of financial uncertainty. ETFs that invest in gold and other precious metals provide direct exposure. This is to the asset class. This is without the need for physical ownership. SPDR Gold Shares (GLD) are a notable example.
It offers investment results that correspond to the price and yield performance of the commodity. It has a competitive expense ratio of 0.40%. This makes it an attractive option for investors. This benefits those looking to add some stability to their portfolios.
Real Estate Investment Trusts (REITs) ETFs
This is for those looking to diversify into real estate. This is without the complications of direct property management. REIT ETFs offer a compelling option. Vanguard Real Estate ETF (VNQ) provides exposure to a range of real estate sectors. This offers the potential for income through dividends alongside growth.
It has a low expense ratio of 0.12%, making it an efficient choice for investors. Another option in this space is the iShares US Real Estate ETF (IYR). This tracks the performance of the Dow Jones U.S. Real Estate Index and provides exposure to a variety of REITs.
With an expense ratio of 0.42%, it offers a slightly higher cost but remains competitive.
Infrastructure ETFs
Infrastructure investments include:
⦁ utilities
⦁ transport
⦁ energy
This tends to be less susceptible to economic downturns. iShares Global Infrastructure ETF (IGF) provides global exposure to this essential sector, offering a blend of growth and defensive characteristics. It has an expense ratio of 0.46%.
Another option is the First Trust Global Infrastructure ETF (IFRA), which has a lower expense ratio of 0.60%, but a narrower focus on developed markets.
Infrastructure ETFs can provide stability to a portfolio and offer potential for long-term growth. While stocks and bonds are common investment options, there are other options available that can diversify your portfolio and potentially increase your income through dividends.
Senior Loan ETFs
ETFs focusing on senior loans, such as SPDR Blackstone Senior Loan ETF (SRLN), invest in floating-rate senior loans that adjust with market rates, offering protection against rising interest rates. This asset class typically demonstrates lower volatility, appealing to conservative investors.
However, it’s important to note that senior loan ETFs may also have higher expense ratios due to active management.
Hedge Fund Strategy ETFs
Hedge fund strategy ETFs include IQ Hedge Multi-Strategy Tracker ETF (QAI). It seeks to replicate hedge fund investment strategies. This offers diversified exposure across various asset classes and strategies. This is to mitigate risk.
These ETFs may also have lower fees compared to traditional hedge funds. This makes them more accessible to everyday investors.
Dividend Growth ETFs
For long-term investors seeking stable income, dividend growth ETFs like Vanguard Dividend Appreciation ETF (VIG) can be a worthwhile option. These types of ETFs invest in companies with a track record of consistently increasing their dividends over time.
This allows investors to not only receive regular income. It also benefits from potential capital appreciation. This is because the company’s stock price increases.
Commodities ETFs
Investing in commodities through ETFs like PIMCO Commodity Real Return Strategy ETF (PCRAX) provides inflation hedging and diversification benefits, as commodities often move inversely to stocks. These types of ETFs invest in a variety of commodities such as:
⦁ gold
⦁ oil
⦁ Agriculture products
Moreover, investing in commodities through ETFs offers advantages over directly purchasing physical commodities. This includes lower transaction costs and easier management.
Green Energy ETFs
For those looking to invest in the future of energy with a conservative stance, iShares Global Clean Energy ETF (ICLN) offers exposure to renewable and clean energy companies, combining ethical investment with growth potential. This ETF can provide long-term growth opportunities.
For investors interested in a specific sector of clean energy, there are specialized Alternative ETFs available. For example, the Invesco Solar ETF (TAN) focuses solely on solar energy companies and has seen significant growth in recent years.
Fixed Income ETFs
Fixed-income ETFs, such as Vanguard Total Bond Market ETF (BND), offer regular income through bond investments, presenting a lower-risk profile suitable for conservative portfolios. This ETF tracks the performance of a broad index of US investment-grade bonds, providing diversified exposure to the fixed-income market.
Moreover, fixed-income ETFs provide liquid alternative assets flexibility for investors. This is because they can be bought and sold on stock exchanges just like stocks. They also have lower management fees compared to traditional bond funds, making them a cost-effective option for long-term investments.
Volatility-Indexed ETFs
ETFs that track volatility indexes, like ProShares VIX Short-Term Futures ETF (VIXY), provide a method for investors to hedge against market volatility, acting as a form of insurance for their portfolio. These ETFs track the performance of volatility futures contracts. This increase in value during times of market turmoil.
While they may not be suitable for long-term investments, they can be useful for short-term strategies. It can also act as a diversification tool within a portfolio.
Currency ETFs
Currency ETFs offer exposure to foreign currencies, providing diversification and potential protection against the devaluation of the domestic currency. WisdomTree Japanese Yen Strategy Fund (JYF) is a prime example. This ETF tracks the performance of the Japanese yen against the U.S. dollar.
Explore the Alternative Investment ETFs for Risk-Averse Investors
In conclusion, alternative investment ETFs can be a valuable addition to any portfolio. This offers the potential for diversification and risk management. By understanding the different types of alternative investment ETFs available, investors can make informed decisions.
This is about incorporating them into their investment strategy. As always, it is important to conduct thorough research and consult with a financial advisor before making any investment decisions. So don’t overlook the potential benefits of adding alternative investment ETFs to your portfolio today!
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This is about incorporating them into their investment strategy. As always, it is important to conduct thorough research and consult with a financial advisor before making any investment decisions. So don’t overlook the potential benefits of adding alternative investment ETFs to your portfolio today!
Did you find this article helpful? Check out the rest of our blogs!
