The 12 Best ETFs to Battle a Bear Market – Kiplinger’s Personal Finance

Investors who are fearful that 2022’s market downturn is about to get a lot worse can find plenty of protection among exchange-traded funds (ETFs). Individual stocks can carry a lot of risk; on the other hand, mutual funds don’t have quite the breadth of tactical options. But if you browse through some of the best ETFs geared toward staving off a bear market, you’re sure to find a bounty of options that mesh well with your investing style and risk profile.

Entering 2022, Wall Street keyed in on a multitude of risks, among them the threat of high inflation and numerous Federal Reserve interest-rate hikes. So far, both fears have played out – plus, stocks have also been bombarded by other issues, such as Russia’s war in Ukraine and fresh COVID outbreaks in China. 

That has sent the Nasdaq into bear-market territory and has the S&P 500 on the brink. And there are reasons to believe things could get even worse from here.

“U.S. stocks have suffered the biggest year-to-date losses since at least the 1960s. That’s ignited calls to ‘buy the dip.’ We pass, for now,” says a team of BlackRock Investment Institute strategists. “Valuations aren’t much cheaper given rising interest rates and a weaker earnings outlook, in our view. A higher path of policy rates justifies lower equity prices. We also see a risk the Fed will lift rates too high – or that markets believe it will. Plus, margin pressures are a risk to earnings.”

How nasty this bear-market move gets remains to be seen. But if you’re inclined to protect yourself from additional downside – now, or at any point in the future – you have plenty of tools at your disposal.

Here are a dozen of the best ETFs for a continued bear market. These ETFs span a number of tactics, from low-volatility stocks to bonds to commodities and more. Each has outperformed the S&P 500 so far in this market downturn – and several have even put up some impressive gains.

Data is as of July 12. Dividend yields represent the trailing 12-month yield, which is a standard measure for equity funds.

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Invesco S&P 500 Low Volatility ETF

  • Type: Low-volatility stock
  • Assets under management: $10.4 billion
  • Dividend yield: 2.2%
  • Expenses: 0.25%

One of the most popular types of ETFs for a bear market is low-volatility funds. The objective is pretty straightforward: Invest in stocks with low volatility, which in a down market should limit downside.

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