If you’ve seen the values of some of the tech stocks in your portfolio plunge 40% or more in recent months, you’re not alone. If you still believe in the long-term prospects of those stocks and nothing has materially changed from a company or industry perspective, there is no need to sell or make rash decisions – the market will recover.
That said, it’s a good idea to offset those short-term losses with investments that behave differently in a given market cycle. So instead of adding more tech stocks to your portfolio, consider these two exchange-traded funds (ETFs) for balance. Both are focused on high dividends and are mostly made up of value stocks, which are a good hedge against falling tech stocks.
1. WisdomTree US High Dividend ETF
the WisdomTree US High Dividend ETF (NYSEMKT: DHS) it has been among the best performing ETFs on the market. So far this year, it has returned around 7%, and in the last 12 months, as of March 28, it has returned 18%. At a volatile time for tech stocks, it gives you positive returns as well as dividend income to reinvest or pocket.
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WisdomTree has surpassed most of the ETFs in its class due to its unique methodology. It tracks its own index: the WisdomTree US High Dividend Index. The index is weighted by the dividend each component company is projected to pay in the coming year, based on the most recent dividend. The methodology also applies a composite risk score to each stock based on three factors: value, quality, and momentum. Stocks with a better Composite Risk Score will see their weight increased, while stocks with a poorer rating will see their weight reduced.
This results in a fund that invests in large, stable, high-quality companies that pay good dividends. As of February 28, financials represented 14.2% of the portfolio, followed by consumer staples (14.1%) and health care (12.7%). The fund has more than 300 holdings, with exxonmobile, Chevron, and Pfizer like the big three.
It has been a strong long-term performer, averaging a 10.9% annual return over the past 10 years through March 28. Also, pay a monthly dividendinstead of quarterly. For March, the dividend was $0.13 per share with a yield of about 1.8%. Last year it paid about $2.67 per share annually. the expense ratio it is 0.38%.
2. iShares Core High Dividend ETF
Another high-yielding dividend ETF this year is the iShares Core High Dividend ETF (NYSEMKT: HDV). This ETF is narrower in scope, following Morningstar’s Dividend Yield Focus Index, which includes only high-yielding dividend-paying companies that meet criteria for quality and financial health. There are only 75 companies in this ETF, with ExxonMobil, abbyand JPMorgan Chase as the three largest holdings.
Like the WisdomTree ETF, it comprises primarily large-cap value stocks, primarily those of stable blue-chip companies. Health (22.8%), energy (18%) and basic consumption (16.8%) are the three sectors with the highest representation.
The ETF is up 6% year to date as of March 28, with a one-year total return of 19.4% through February 28. It has a 10-year average annual return of 10.1% through February 28. The performance figures are quite similar to the results of the WisdomTree ETF.
However, it has a higher dividend payout. Its most recent quarterly dividend payment was $0.77 per share in the first quarter with a yield of 2.9%. Last year, the iShares fund paid about $3.50 per share annually. This ETF also has a low expense ratio of 0.08%.
So while there’s no need to dump your tech stocks due to a temporary market fade, it’s not a bad idea to add some ballast to your portfolio with these ETFs.
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