Top Recommended ETFs for Strategic Investment in 2017

This comprehensive guide explores top ETFs for 2017, emphasizing diversified, conservative, and hedging options suitable for various investor strategies amid shifting market conditions. It highlights key features, risk profiles, and investment considerations for each recommended ETF, enabling investors to build resilient portfolios with confidence throughout the year.

Top Recommended ETFs for Strategic Investment in 2017

After a highly dynamic and upbeat first quarter where the S&P 500 experienced a remarkable surge of over 7%, the financial markets began to slow down as the year progressed. The rapid growth led to valuations reaching historically high levels, which started to dampen investor optimism and caution grew among market participants. During this period, many investors looked for safer, more diversified investment options to mitigate risks and protect their capital from market volatility. In this context, Exchange-Traded Funds (ETFs) gained popularity as an attractive alternative to individual stocks, mainly because of their inherent diversification, liquidity, and ease of trading.

Considering the current market climate, what investment strategies should investors adopt for the remainder of 2017? To help investors navigate this environment, this article outlines some of the most promising ETFs to consider this year, highlighting their unique features, risk profiles, and suitable investment horizons. Whether you're seeking conservative exposure or looking to hedge against downturns, these ETFs offer versatile options for different investor appetites.

iShares Core Conservative Allocation ETF (AOK)
Type: Asset Allocation (Conservative)
Expense Ratio: 0.25%
As a staple for conservative investors, the iShares Core Conservative Allocation ETF (AOK) offers a well-balanced, low-risk investment portfolio designed for those prioritizing capital preservation and steady income. It functions as a ready-made diversified fund, blending various asset classes such as cash equivalents, bonds, and stocks, with a conservative tilt. AOK invests approximately 1% of its assets in cash, around 32% in equities, and roughly 67% in fixed income securities. Its holdings include a mix of U.S. and international markets, with international exposure distributed across Germany (3%), the U.K. (4%), and Japan (5%). This diversification is achieved through participation in a variety of iShares funds, including the iShares U.S. Credit Bond ETF and the iShares S&P 500 ETF. The expense ratio remains modest at 0.25%, making it a cost-effective choice for long-term, low-risk investors seeking stability and moderate growth.

ProShares Short S&P 500 ETF (SH)
Type: Inverse Index Fund
Expenses: 0.89%
For investors who are either hedging existing positions or have a bearish outlook on the overall market, the ProShares Short S&P 500 ETF (SH) presents an attractive option. This ETF takes an unleveraged short position on the S&P 500 index, meaning it gains when the index declines and loses when it rises. Specifically, it aims to deliver approximately 1% of its value for every 1% decrease in the S&P 500. This inverse relationship makes SH an effective tool for hedging long equity positions or for speculative bets on market downturns. However, investors should be cautious with this ETF, especially over longer periods, since its performance can diverge from the inverse of the S&P 500 due to the effects of daily compounding and volatility. Thus, it is best suited for short-term hedging and tactical trading rather than long-term holding.

Pimco Short-Term Bond ETF (MINT)
Type: Short-Term Bonds
Expenses: 0.35%
For those prioritizing stability and liquidity, the Pimco Short-Term Bond ETF (MINT) offers a compelling choice. It invests primarily in short-term, investment-grade debt issued by reputable corporations like Verizon and Barclays PLC, aiming to outperform money market funds while maintaining low volatility. MINT currently yields slightly above 1%, making it suitable for conservative investors seeking modest income with minimal risk. The fund has demonstrated consistent stability, with its net asset value largely remaining within the range of $100.50 to $101.50 over the past five years. Its focus on short-duration bonds minimizes exposure to interest rate fluctuations, making it a reliable component of a conservative investment portfolio.