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Vanguard Consumer Staples ETF

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Consumer Staples ETF for Uncertain Times, VDCConsumer staples/Consumer defensive stocks are a sector that is exactly what the name suggests. They are products and services that no matter the situation consumers are unable or unwilling to go without. Examples include, Walmart, Costco, Coca-Cola, Colgate-Palmolive, etc. These big name household staples are unlikely to give you the astronomic growth of the newest tech startup or revolutionize their industry but they do have some very appealing attributes that may make investors want to include them in their portfolio. 1) They Don't go Backwards: Too often investors are focused on the upside and not enough on the downside. Just like that new technology company experienced huge growth by replacing the technology before it so to will it eventually be replaced. Consumer staples do not suffer from this need to constantly innovate, they exist to provide goods and services that are generally essential for our continued existence and so consumers are are unable to easily replace them with a new product. Of course no business is immune to failure but generally the companies that exist in the consumer staples sector will retain their value over time. 2) Safety During Economic Downturns: During periods of economic hardship consumers may decide to completely abandon purchasing anything except the essentials needed for everyday existence. This will inevitably result in decreased profits for most businesses in the economy but not so much the consumer staples. While they may also experience decreased profits, the decrease in revenue is capped for consumer staples by the fact that people still have to eat, brush their teeth, and clothe themselves, this results in businesses in the consumer staples sector generally outperforming during economic downturns. 3) Inflation Resistant: Businesses in the consumer staples sector are able to effectively price higher inflation into their products and services. When high inflation puts excessive upwards pressure on prices consumers will start to taper their purchases of luxury and non-essential items, this generally means these businesses have to reduce prices to maintain sales or accept a decrease in revenue. Businesses who offer staple goods and services are not as prone to suffering from this phenomenon and can more easily price inflation into their products. This makes consumer staples an excellent hedge against inflation. The easiest way for new or "lazy" investors to gain exposure to the consumer staples sector is to use an ETF. I recommend using the Vanguard Consumer Staples ETF (VDC). This ETF has 97 holdings diversified across the consumer staples sector, its top 10 holdings are: 1 Procter & Gamble Co. 2 Walmart Inc. 3 Coca-Cola Co. 4 PepsiCo Inc. 5 Costco Wholesale Corp. 6 Philip Morris International Inc. 7 Mondelez International Inc. 8 Altria Group Inc. 9 Estee Lauder Cos. Inc. 10 Colgate-Palmolive Co. With the multiple headwinds currently facing the markets including, out of control inflation, China's property market collapsing, irresponsibly loose monetary policy, and record high valuations across every asset class, now is a good time to make sure you have exposure to an ETF like VDC that can help you weather an impending financial disturbance. *Not a recommendation to buy or sell*
AMEX:VDC
by MarkE
The Bad News About Record-Low UnemploymentUnemployment is the lowest it’s been in 50 years. That means most people who want to work can find a job. It also means people are making more money and buying more stuff. All good. More people working is always positive. But a low unemployment rate is a double-edged sword. See, the unemployment rate is cyclical. It’s always moving up or down. And at this point—3.6%—there’s almost no room for it to drop more. That’s where the trouble starts: When the unemployment rate bottoms out, like it’s doing now, it means the economy has peaked. And a recession is probably coming… We’ve Been Here Before Notice that every time the unemployment rate hits a low, a recession soon follows. It doesn’t come immediately, though. Over the past 70 years, a recession has started an average of five months after the unemployment rate bottomed. Also, remember that the unemployment rate lags behind the actual economy. That means it rises and falls after major shifts in the economy, not before. That makes sense when you think about it. People don’t often lay off employees the first day business starts to slow. There’s a lag. So the unemployment rate won’t start rising until the US has already fallen into a recession. More Signs Flashing Red A bottoming unemployment rate isn’t the only sign that the economy has peaked. Like the unemployment rate bottoming, the inverted yield curve has preceded every single recession over the past 50 years. Keep in mind, neither of these indicators means a recession is imminent. And they don’t tell us how severe the recession will be. But it’s certainly coming. So is the market downturn. Remember, we’re at the tail-end of the longest bull market in history. So a major pullback is not out of the question. And, since stocks fall an average of 32% in a bear market, you want to start preparing your portfolio now. That means adding recession-proof stocks and other assets that will rise when the broader stock market falls. This Is How You Prepare for a Recession Dividend-paying stocks—especially in sectors like consumer staples, utilities, and defense—are some of the best ways to buoy your portfolio as we head into this recession. Consumer staples are a great refuge when the economy hits the skids. These businesses sell things like toilet paper, laundry detergent, and dog food—things people buy no matter what’s happening in the economy. Right now, my favorite way to invest in consumer staples is the Vanguard Consumer Staples ETF (VDC) . It pays a safe and stable 2.7% dividend yield. Utilities, of course, are about as recession-proof as it gets. People pay their power bills even when the economy tanks. So these businesses are very stable. My top utility pick right now is the Fidelity MSCI Utilities ETF(FUTY) . It pays a 2.9% dividend yield. That’s 50% higher than the yield on one-year Treasury bills. Then there’s the defense sector, which is one of my favorite recession-proof sectors. In fact, US defense spending usually goes up during a recession. The iShares US Aerospace & Defense ETF (ITA) , which pays a 1.1% dividend yield, is a good way to invest broadly in this sector.
AMEX:VDC
by RRoss
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