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3 Strong Sector ETFs to Consider Buying Now

When volatility picks up and you want to reduce your single stock risk, looking at ETFs for both short and long-term investment opportunities makes a lot of sense

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This story originally appeared on MarketBeat

Check Out These 3 Sector ETFs Now

The rise of ETFs, or exchange-traded funds, has opened up an entirely new realm of possibilities for investors. Instead of having to purchase individual stocks in a specific area of the market, these funds allow investors to take advantage of the benefits of diversification and easily add exposure to a group of stocks. They are also highly liquid assets and have lower expense ratios than actively managed funds, which are additional reasons why ETFs are so attractive.

When volatility picks up and you want to reduce your single stock risk, looking at ETFs for both short and long-term investment opportunities makes a lot of sense. They are also great for playing strength in certain sectors of the market, which means investors can take advantage of areas that are thriving this year.

If you’re interested in these types of investment opportunities, keep reading below for an overview of 3 strong sector ETFs to consider buying now.

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Select Sector SPDR Trust Energy ETF (NYSEARCA: XLE)

One of the big surprises thus far in 2022 has been the strength in the energy sector, which has been rallying while the overall market is off to one of the worst starts to a year on record. Demand for oil and gas is increasing as the world’s economy gets back to normal, which is certainly a positive for companies in the sector. Inflation is also impacting energy stocks in a good way, as rising oil prices mean better earnings for these companies. The pandemic essentially created a massive supply imbalance and also forced almost every oil and gas company to cut costs and improve their balance sheets amidst so much uncertainty, which could be another reason why these stocks are off to a hot start.

While there are plenty of strong individual names to choose from in the sector, the Select Sector SPDR Trust Energy ETF is perhaps the best way to play this trend. With an annual expense ratio of a mere 0.12% and a distribution yield of 4.21%, the XLE is a low-cost income-producing ETF that is an ideal way to add exposure to energy stocks. The fund’s top holdings include Exxon Mobil Corporation, Chevron Corporation, EOG Resources Schlumberger NV, ConocoPhillips, and more, which are some of the best names in the business.

SPDR Portfolio S&P 500 High Dividend ETF (NYSEARCA: SPYD)

Dividend

stocks have been in the spotlight lately as investors look for places to park their capital to help deal with the rising threat of inflation. Investing in these types of stocks can be a great way to generate extra income and build long-term wealth, yet it can be difficult to determine which companies are going to be reliable over the years. After all, the worst-case scenario for a dividend investor is to see a company forced to cut its payout. That’s a big reason to consider adding the SPDR Portfolio S&P 500 High Dividend ETF to your plans.

This ETF tracks an index of the 80 highest-yielding stocks selected from the S&P 500, which means investors that are interested in high-quality large-cap dividend stocks should be very interested. The fund’s distribution yield comes in at 3.68% and offers exposure to appealing S&P components like Pfizer, Exxon Mobil, Baker Hughes Company, M&T Bank Corporation, and more. It’s worth noting that this ETF is trading well above its 200-day moving average while the major indices are not, which tells us that it is showing relative strength in a weak market environment.

Consumer Staples Select Sector SPDR Fund (NYSEARCA: XLP)



If you’re an investor that is concerned the market is signaling rough waters ahead for the economy, the Consumer Staples Select Sector SPDR Fund should definitely be on your shopping list. It’s a fund that includes some of the top consumer staples names in the world, which are businesses that can be relied on to put up consistent earnings in any economic circumstances. Think about products like toilet paper, snack foods, soft drinks, and cleaning products. These are items that are constantly in demand, which provides peace of mind to investors during periods of uncertainty.

This fund is another great option to consider thanks to its low 0.12% expense ratio and 2.28% distribution yield. It’s also outperforming the S&P 500 to start the year, which is a good indication of the types of stocks that investors are looking for in a volatile market. Top holdings for the Consumer Staples Select Sector SPDR Fund include Procter & Gamble, PepsiCo, Coca-Cola, Costco, Altria Group, Walmart, and more.

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