8 Ways to Safeguard Your Money With ETFs in Turbulent Markets

by: Tom Lydon

While the situation is Greece is approaching some semblance of a resolution, the global economy is far from out of the woods. We may continue to see bumps on the road back, but with these exchange traded funds (ETFs), you can help protect your assets.

Blue-chips. No one’s really worried about their blue-chip stocks during the recent upheaval, and any volatility is usually temporary.

  • iShares DJ U.S. Consumer Goods (NYSEARCA:IYK)
  • SPDR Dow Jones Industrial Average (NYSEARCA:DIA)

Look for yield where you can find it. The debt crisis in Europe will likely keep European Central Bankers from raising rates, and this will put pressure on the Fed to follow suit. The average money-market account is paying about 0.76% interest and a one-year certificate of deposit is just 1.2%. With inflation at 2.4%, you’re losing money just by saving.

Mortgage. As rates remain low, homeowners may find cheaper mortgages. The rate on a 30-year conforming loan is down to 5.07%. The yield on 10-year Treasury bonds has also fallen 3.4% from 4% a month ago.

  • iShares Lehman 7-10 Year Treasury Bond Fund ETF (NYSEARCA:IEF)

Dividends. Dividend-paying stocks are providing decent yields, with many a stock dishing out yields of 3% or greater.

  • iShares Dow Jones Select Dividend Index Fund (NYSEARCA:DVY)
  • SPDR S&P Dividend (NYSEARCA:SDY)

Big European companies. The long-established European names have plummeted in value in the wake of the recent events. The drop in European stocks won’t continue forever and it is a good idea to keep an eye out on the situation.


High-yield bonds. Investors were quick to dump anything “risky,” which included high-yield/junk bond ETFs. However, the funds have made some small gains after the exodus.

  • iShares iBoxx $ High Yield Corporate Bond (NYSEARCA:HYG)
  • SPDR Barclays High Yield Bond (NYSEARCA:JNK)

Beware of “safety.” Long-term Treasury bonds like the 30-year Treasuries only pay 4.1%. Investors turn toward them in times of uncertainty but inflation could hurt you in the long run. Bond coupons don’t adjust to reflect rising prices.

  • Direxion Daily 30-Yr Treasury Bear 3x Shares (NYSEARCA:TMV)
  • iShares Lehman 20+ Year Treasury Bond Fund (NYSEARCA:TLT)

TIPS. Treasury Inflation-Protected Securities, or TIPS, don’t offer much at current levels. The “real” yield on 10-year TIPS is just 1.25% and the 30-year is 1.73%. Figures well above 2% will be a decent deal for investors.

  • iShares Barclays TIPs Bond ETF (NYSEARCA:TIP)
  • SPDR Barclays Capital TIPS (NYSEARCA:IPE)

Lastly, you can insulate yourself from turbulence by having a trend following strategy with a pre-determined point at which you sell when the markets decline. Our strategy is to sell when a fund drops below its 200-day moving average or 8% off the recent high.

Disclosure: No positions