With all the nutty ways that the Market is behaving, many investors, are looking for some kind of safe haven to own that won’t get hurt by the ups and mostly downs that are going on. One of the safer investments are ETFs. While they can offer some safety, it really depends on the choice of ETF, because there are different versions.
I have looked at some of these and made my decisions. But I am reviewing now because I don’t really know if i made the right decision or not! However, since most of what I do is experimental, I have started an experiment with some ETFs.
A few notes on ETFs
ETFs are sold to us based on the idea of instead of buying one stock and praying that you picked the right one, you buy an ETF and you get many stocks. This is kind of correct but it has certain limitations. I’m not saying that buying ETFs is a bad move, but there are things you should be aware of before you just blindly start buying into them.
- The balance of the stocks is not one to one. In other words, you might be thinking that if you buy 1 share of an ETF that you are getting an even portion of several stocks. But if you look at what the ETF actually holds, you might be surprised. For instance, I looked at one today, where almost half of the shares held in the ETF were in the Mag 7. Then there were drips and drabs of other stocks, but primarily it was all Mag 7. That’s ok if you think the Mag 7 is going to do well, but lately with all the news about the CapEx spending by these companies, there is doubt that it will pay off for the short term. So basically the ETF is at the mercy of how well those stocks do. Others are more balanced and might be a safer bet in these troubled times. You have to check the holdings to find out.
- Without proper training, I assumed that the value of the ETF went up or down based on the performance of the companies that the ETF held stock in. However, the value of the ETF is really based on how popular the ETF is with investors. This is just like Stocks. If a company does really well, the stock can still go down if the investors don’t buy a lot more of it. The same with ETFs. The way that the stocks held in the ETFs go up or down is not really the factor that drives the price.
- There is a value called “NAV” that tells you what the accumulated value of the ETF is. This should be reported by your broker’s research information. Usually they run prettly close but they don’t really have to. Generally speaking if the NAV is lower than the price, it means you are paying a premium for the ETF where if the NAV is higher than the price, you are getting the ETF at a discount.
- ETFs have expenses. They are being managed in one way or another, so the company that is managing it charges for that service. Actively managed ETFs charge more because they have people watching and making adjustments. Those people have salaries and need to be paid. Passively managed ETFs are adjusted either by robots or computer and generally follow certain indexes or other factors. Passively managed ETFs have a much lower expense ratio and truth be told, generally do better than actively managed ones.
Different Types of ETFs
ETFs by Index
Some ETFs are based on an Index of some kind. Usually these will be the S&P500, the Nasdaq, or Russell 2000. You have to be careful though, because even if an ETF has all the stocks in the S&P500, they might still have more of certain stocks, like Nvidia or Chevron, etc. So if Nvidia doesn’t do well, and that’s mostly what is in an ETF, then the ETF does poorly too. Some Index stocks are more balanced and have fairly equal amounts of all the stocks which I think (just my opinion) are safer since they aren’t dependent on one company.
ETFs by Sector
There are basically 11 Sectors that US stocks are broken up into. Energy, Utilities (yes, they are separate), Financial, Communications, Consumer Staples, Consumer Discretionary, Healthcare, Industrials, Materials, Real Estate and Technology. The ETFs in these hold stocks specific to that sector. This can be helpful if you find that during an economic downturn you believe that consumers will only be buying what they really need (staples) and avoid spending on other items (discretionary). However if the economy is good, people might increase spending on houses or Materials (wood and metals for building or home repairs). The choice to use sectors is pretty logical if you think about it but you do it based on your reading of the economy (I guess).
ETFs by Capital
Companies are sometimes divided up by the value of the company. There are Small Cap, Mid Cap, and High Cap (and ultra-high cap) stocks. This can be thought of as how big the company is. I thought that High Cap stocks would be the most stable, but these days it’s really hard to judge. Some of the bigger companies are struggling especially with all the AI stuff going on. They can be very volatile. Small Caps are struggling too but they are smaller and the effect on them is a little smaller. It’s all dependent on how you think the economy is going to treat the companies.
ETFs by Country
The ETFs I have mentioned so far, tend to be filled with US stocks but there are companies in other countries that you can be a part of too. You can find ETFs that are specific to Japan, China, Denmark, etc. but there are also some that have mixtures of countries just called foreign markets. Some are called “Emerging Markets” which are countries where the industries are just starting to get going.
Other ETFs
You can find ETFs that are mostly Growth Stocks which will hopefully grow in value over time. Other EFTs concentrate on Dividend paying Stocks and usually pay a reasonable dividend themselves. This allows investors to concentrate on cash flow in dividends or value growth, which you have hopefully figured out what direction you want to go in already.
There are probably other types of ETFs out there which are specific to other criteria, but these are the main areas. It seems you can always find one that suits your needs. I don’t want them to be a major part of my strategy, but I think everyone should have some in their portfolio.
My choices and Strategy
I had initially thought that I would buy into each of the sectors using the State Street ETFs. They have a nicely arranged group with one ETF for each sector, and I thought that might work out well. I decided in the end to go with a different approach. However, I might still go back and do that at some point. I do keep a watchlist in a spreadsheet of all their ETFs and looked at it to see how things are going. In my Google Finance Watchlist, I also see each Indexes of the sectors and watch them too for how things are going overall. They all seem to rise and fall like waves on the beach, so it’s hard to judge where a good sector would be!
In the long run, I decided to get one each of the Large Cap, Mid Cap and Small Cap ETFs as well as one Foreign Stock ETFs. Then I chose a few Dividend concentrated ETFs since I like the idea of cash flow in my portfolio. I tend to be drawn to dividend paying stocks, so I wanted to do the same in my ETFs. Below I listed the ones that I chose (from various providers like Schwab, Vanguard, etc). You can see what type they are and what percentage of my overall portfolio they are (based on number of shares, not value).
So far, my Large Cap, Foreign Stock, and Spit Dividend and Growth stocks have gone into the red. I am hoping that will change when we get out of this War in Iran, but who knows?
SCHG Large Cap 1.51%
VOE Mid Cap 0.26%
XSHD Small Cap 3.75%
SCHF Foreign Stocks 1.93%
DGRO Split Dividend and Growth 0.65%
HDV High Dividend 0.39%
SCHD Dividend Equity 2.57%
SPYD High Dividend 1.68%
It’s Good Friday 2026 as I am writing this, and the Market is closed for the weekend. Not much to watch today, but I will continue to hold these ETFs like I do most of my stocks whether they are winners or losers right now. I also add to them once a month just to keep bringing my value up, even if they aren’t doing good. They all started with the same investment and when I add to them, I sort of pick and choose at the time, which ones I buy, but I do a little each month. I’ve heard that it’s good to do that with ETFs.
