If you’ve taken a look at the Dow Jones, Nasdaq or S&P 500 lately, you probably didn’t see a pretty picture. They are all taking a beating and with economists fretting about a potential recession, it’s beginning to look like this bear market will continue for quite some time.
Add that to runaway inflation and record-high gas prices, and it’s easy to see why investors are racing for the exit doors while also looking for alternative investments for their cash. What alternative investments could work? If you’re in this situation and not sure where to go, take a look at this list of Benzinga’s favorite alternative investment exchange-traded funds (ETFs).
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Invesco Dynamic Energy Exploration and Production ETF (PXE)
Commodities have long been one of the most popular alternative investments, and it’s not hard to understand why when you take a look at oil and gas prices. From an investor’s perspective, the good thing about oil is that it’s going to be sold regardless of how well the stock market performs.
The Invesco Dynamic Energy Exploration and Production ETF (NYSEARCA: PXE) fund comprises 30 different companies that are actively drilling for oil and natural gas and searching out new places to find these valuable resources. The fund managers have chosen a solid mix of value and growth stocks, which include some of the following companies:
Occidental Petroleum Corp. (NYSE: OXY)
Marathon Petroleum Corp. (NYSE: MPC)
EOG Resources Inc. (NYSE: EOG)
United States Oil Fund (USO)
Anyone who has filled up their car with gas lately is definitely feeling the bite from increased oil prices. External factors, most notably the Russian invasion of Ukraine, have roiled the oil markets and pushed prices above $150 per barrel. It’s still uncertain how high the price of oil will go, but while it’s this high, an ETF that is tied to the price of oil could be a solid investment option.
Enter the United States Oil Fund (NYSEARCA: USO), which concentrates on buying and selling oil futures. That means USO profits are not contingent on securing permits to build new rigs then hoping those rigs actually operate. In the case of USO, as long as oil prices are this high, investors are likely to see strong returns.
Vanguard Real Estate Fund (VNQ)
Real estate is perhaps the oldest and most respected of all the options in the alternative investment pool. Why? The answer is simple. Real estate lets investors have the chance to earn passive income while the property appreciates. It also offers investors significant tax benefits.
The Vanguard Real Estate Fund (NYSEARCA: VNQ) is a compelling mix of equity in some of the most successful real estate investment companies and development firms in the country. Highlights of the Vanguard fund include the following:
Avalon Bay Communities Inc. (NYSE: AVB): nationwide property management group
Simon Property Group Inc. (NYSE: SPG): nationally known shopping mall operator
American Tower Corp. (NYSE: AMT): nationally known telecommunications tower owners
The beauty of the Vanguard fund is that it gives investors a diverse portfolio of real estate assets that they can profit from without having to choose or manage them.
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GraniteShares Gold Trust (BAR)
No list of alternative investment ETFs would be complete without a precious metals option. The price of gold has been on a upward march for decades now, and as the stock market continues to show bearish tendencies, gold can be a solid bet for investors looking to ride out the storm.
However, for many investors, the problem with buying gold is making sure that they’re actually investing in gold bars. Many of the invest-in-gold pitches you see on TV are bait-and-switch operations that purport to offer gold but pressure you into buying gold coins instead of actual gold bullion.
The GraniteShares Gold Trust (NYSEARCA: BAR) is tied to the performance of gold bullion, not coins. That means investors in this ETF are actually buying shares of gold and not coins which are only partly composed of gold. Another obvious advantage of investing in BAR is the fact that investors can buy gold without having to find a safe place to store it. The GraniteShares Gold Trust is backed by a large tranche of gold bullion, which is stored in a secure vault in London, England.
Global X SuperIncome Preferred Fund (SPFF)
Holding stock in companies can be a lot like ordering single malt whisky in a bar. It may all be single malt, but not all single malt is created equally. That highly aged stuff up on the top shelf tastes a whole lot better. Preferred stock is like top-shelf whisky.
You can hold common stock in a company that appreciates, but the payout you get from that is nothing like the payout that preferred shareholders receive. Almost all preferred shares include a provision for what is known as a fixed dividend. This fixed dividend basically guarantees the shareholder a payout, one which is usually much larger than most common stock payouts.
Why don’t more investors buy preferred shares? For the same reason you don’t order Macallan 21 or Johnnie Walker Blue Label at your local watering hole. If they even have it, the chances are pretty good it will be too rich for your blood. But wouldn’t it be nice if there was an ETF that only included preferred shares?
The Global X SuperIncome Preferred Fund (NYSEARCA: SPFF) does exactly that. SPFF investors get the benefit of a carefully selected mix of preferred shares and the fixed dividends those shares provide. The fund’s managers focus investor capital almost exclusively on the preferred shares that consistently pay out the highest dividends.
How do you Know Which ETF is Right for You?
Every investor's needs are different, and so is their financial situation. Choosing which ETF is right for you depends on things like your investment goals, how much capital you have to invest and how much risk you can stand. Regardless of your individual answers to these questions, it’s a good idea to consult with a financial advisor before participating in an offering.
Although the performance of alternative investments may not necessarily be tied to that of the stock market, they aren’t can’t-miss investments. The risk of loss is always present. If you find an alternative ETF that fits your investor profile, now might be a great time to buy in.
Photo by Vitalii Vodolazskyi on Shutterstock
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