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ETFs That 'Lose Less' Can Earn You More

Keep in mind, these results go back to November of 2009. And the prevailing wisdom is that -- in spite of bearish corrections in 2010 and 2011 -- risk assets have trended higher. Typically, this would mean that the riskier, the more the reward.

However, in the "uptrend" the best returns have come from assets that do not lose as much in the one-day collapses or the bearish corrections. Diversified high-yield bond ETFs like PHB have seen less downside pain than the S&P 500 on these occasions, but have outperformed on the upside.

The same can be said for higher-yielding ETFs (e.g., Pipeline Partnerships ETFs, Dividend ETFs, etc.) as well as non-cyclicals (e.g., Pharma ETFs, Staples ETFs, Utilities ETFs.). Each and every one has out-hustled the broader domestic and broader world benchmarks.

Some may erroneously conclude that it is merely a case of defensive equity positioning. In truth, it has a lot to do with cash flow and mathematics. Nearly all of the "lose less" performers generate greater cash flow than the S&P 500, and that cash flow accumulates over several years.

In addition, when the broader benchmarks have had a bear of time recovering from -17%, -18%, -19% declines in 2010 and in 2011, the "lose less" crowd typically needed to make up half the ground. The less territory an asset needs to retrace, the more new territory it can claim.
Disclosure Statement: ETF Expert is a website that makes the world of ETFs easier to understand. Gary Gordon, Pacific Park Financial and/or its clients may hold positions in ETFs, mutual funds and investment assets mentioned. The commentary does not constitute individualized investment advice. The opinions offered are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial or its subsidiaries for advertising at the ETF Expert website. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert at the site.
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