U.S. Markets closed

Four ETF Strategies to Ride the Fourth Quarter


As we round out the third quarter, exchange traded fund investors can consider diversifying a portfolio to include munis, alternative energy, European equities and a market hedging strategy for the quarter ahead.

Municipal bonds have been hit after the fallout on the Detroit bankruptcy, coupled with large mutual fund redemptions, reports Trang Ho for Investor’s Business Daily. On the other hand, Andrew Hill, president and co-founder of Andrew Hill Investment Advisors, points out the tax-free muni income look attractive given the higher tax rates this year.

Moreover, the improvement in home prices would also bolster the finances of state and locl governments, which helps with credit quality.

The iShares National AMT-Free Muni Bond ETF (MUB) has a 2.96% 30-day SEC yield. The fund is down 3.8% year-to-date. [Muni ETFs: Cheaper than Corporate Bonds]

Clean, alternative energy is surging this year and could continue to shine as the world tries to find a balance to growing population and pollution.

“Reducing and eliminating pollution just makes common sense even if it did not contribute to causing climate change, which it does,” Andrew Bellak, CEO of StakeHolders Capital, said in the article. “Therefore clean technology has a bright future. The same goes for alternative or renewable energy. It is cleaner, safer and geopolitically less risky. These companies will be the target for takeovers by traditional, cash-rich, fossil-fuel companies, who want to buy their way into the game and remain an energy player.”

The PowerShares Cleantech Portfolio (PZD) has gained 26.7% year-to-date and PowerShares Global Clean Energy Portfolio (PBD) rose 44.0% year-to-date.

The Eurozone has moved out of its Greece debt crisis induced recession as officials did “whatever it takes” to save the euro currency.

“Removing the uncertainty that drove European stocks to bargain prices should continue the price-earnings ratio expansion that is fueling their rally,” CJ Brott, chairman of Capital Ideas, said in the article.

Brott argues that small-cap companies are better positioned for a recovery in the domestic market. The WisdomTree Europe SmallCap Dividend ETF (DFE) is up 26.9% year-to-date. [International Dividend ETFs and Rising Interest Rates]

Once the Fed does decide to taper its stimulus, investors should find a hedge for the short-term volatile market conditions.

Bob Williams, managing director of Delta Trust Investments, points to the PowerShares S&P 500 Downside Hedged Portfolio (PHDG) as a good way to ride the waves. PHDG tries to provide positive total return in a rising or falling market wih limited correlation to equity and fixed-incomer eturns. [ETFs to Limit the Damage of a Stock Correction]

For more information on the markets, visit our current affairs category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.