This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

3 Dynamic ETFs for a Risk-Off World

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( ETF Expert) -- Warren Buffett suggests that we buy when others are fearful. On the other hand, buying when others are afraid is rarely as profitable as purchasing when others are catatonic.

So just how petrified are institutional investors, insiders and the investing public? The Standard & Poor's 500 has shed 125-plus points in 3 1/2 weeks. That is a painful drawdown of -8.75%, but it doesn't meet the standard of a full-fledged correction (-10%).

We also have the infamous fear gauge in the CBOE S&P 500 Volatility Index (VIX). The VIX is getting very close to climbing above a long-term 200-day moving average. Yet, even then, panic is more typically associated with VIX spikes above 30, not 25.

Perhaps opportunists will need to wait a bit longer for the last optimist to raise the proverbial white towel. For that matter, even the adventurous may need to get a gander at the market's reaction to still more efforts at shoring up European confidence. (Does anyone really believe there won't be a globally coordinated central bank action at some point?)

Until the risk-off selling activity subsides, the smartest thing an ETF investor can do is prepare "wish list assets." However, rather than look for the ultimate "risk-back-on" investment, you may want to add an asset that comes with a bit more peace of mind.

Here are 3 "dynamic" ETFs that lose less in selloffs while holding their own in uptrends:

Powerhares Dynamic Retail (PMR). A number of InvescoPowerShares ETFs track proprietary indices, and PMR is no exception. This exchange-traded vehicle tracks the "Dynamic Retail Intellidex" that includes corporations meeting criteria such as earnings momentum, earnings quality and value. The retailers themselves include discounters, warehouse clubs, general merchandisers and specialty stores.

Why PMR? For one thing, its price ratio with the S&P 500 SDPR Trust (SPY) demonstrates consistency in down periods and up periods. Second, it hasn't been selling off at quite the same clip as the broader benchmark.

PowerShares Dynamic Pharmaceuticals (PJP). Even with the markets seemingly crumbling all around us, buyers are still pledging allegiance to drug stocks. As part of the non-cyclical triumverate of utilities, staples and health care, PJP is currently dealing with roughly half the downside pressure as the market at large. And the upside? PJP is still up roughly 8.9% year-to-date, dramatically outpacing the broader S&P 500's 3.2%

>P/> PowerShares Dynamic Leisure and Entertainment (PEJ). This fund reads like a menu of fast-food giants - McDonalds (MCD), Starbucks (SBX), Yum! Brands (YUM) Yum! Brands (YUM), Chipotle (CMG). And while PEJ may track an Intellidex that represents companies engaged in leisure and entertainment, 50% of the current exposure is restaurant-related.

Is that a bad thing? Only if investors begin to shun the drive-through kings. However, PEJ has been the beneficiary of surprising inflows as well as some enviable performance numbers; PEJ is still up a stunning 11% in 2012.

Keep in mind, if you choose to pick up any of these ETFs today, you'll want a protection plan . You may prefer trend identification, stop-limit loss orders or hedging techniques, but you can't afford to buy-n-hold-hope.

You can listen to the ETF Expert Radio Show "LIVE", via podcast or on your iPod. You can follow me on Twitter @ETFexpert.

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.

Gary Gordon reads:

Real Clear Markets
Jeff Miller
Charles Kirk
On Twitter, Gary Gordon follows:

Jonathan Hoenig
Doug Kass
Hard Assets Investor

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
PEJ $35.53 -1.13%
PJP $61.24 -1.40%
PMR $35.79 -0.25%
AAPL $94.28 -0.95%
FB $117.76 0.28%


Chart of I:DJI
DOW 17,667.29 -83.62 -0.47%
S&P 500 2,052.95 -10.42 -0.51%
NASDAQ 4,733.5580 -29.6660 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs