Safety in Consumer Staples5/17/2010 3:35 p.m. EDT Consumer-staples stocks like Procter & Gamble ( PG) grab the spotlight on days like today, when broader market uncertainty drives investors to defensive positions. And while these household names may not be the most glamorous in terms of investment ideas, there's a good argument as to why you should keep the strongest of the bunch stocked in your long-term portfolio. If you want to look to ETFs for defensive positions, funds like SPDR Gold Shares ( GLD) and iShares Barclays TIPs ( TIP) are popular options. However, while gold and inflation-protection securities are both solid, long-term portfolio holdings, investors shouldn't forget about defensive equity options, which can be a good option. Consumer-staples firms like Proctor & Gamble are not just good defensive stocks, they are also mature firms with competitive advantages. One of my favorite consumer-staples picks is the iShares Dow Jones US Consumer Goods ( IYK), a liquid ETF with a reasonable expense ratio of 0.48%. In addition to Proctor & Gamble, IYK's top five holdings include Coca-Cola ( KO), Pepsico ( PEP), Philip Morris ( PM) and Kraft Foods ( KFT). IYK isn't the only option in the ETF universe, but this fund has one distinct advantage over rivals like State Street's ( STT) Consumer Staples Select Sector SPDR ETF ( XLP) and Vanguard's Consumer Staples ETF ( VDC). Unlike XLP and VDC, IYK does not include non-discretionary retailers in its underlying portfolio. You won't find Wal-Mart ( WMT) in IYK. Readers of this blog will know that I'm certainly not anti-retailer. I've been a fan of SPDR S&P Retail ETF ( XRT), which has a great cross-section of retail names. I like keeping retail separate from consumer staples in my portfolio, however, and gain exposure to the consumer staples names through a non-cyclical fund like IYK. It's important to have defensive positions in a well-rounded long-term portfolio, even if you're bullish for the short term. On days like today, when uncertainty reigns, it's good to have a fund like IYK stashed in your portfolio's pantry. At the time of publication, Dion Money Management was long IYK.
Pick Up a Piece of Japan5/21/2010 8:29 a.m. EDT Corrects holding information show Dion Money Management is long EWJ. Earlier this week, I gave investors an assessment of two Asia-Pacific ETFs that could be used for international exposure as an alternative to funds from China or Europe. Those were iShares MSCI Korea Index ( EWY) and iShares MSCI Singapore Index ( EWS). I think another strong bet in the region is Japan, and investors can access it through the iShares MSCI Japan Index Fund ( EWJ). Japan is in a position to benefit from strong demand for its exports from fast-growing countries in Asia. Its largest export destination is China, which took that title from the United States last year. Japan also sees strong demand for exports from countries like India and Vietnam, so it is not entirely reliant on a Chinese economy that many see as due for an economic slowdown. Japan also remains a strong exporter to the U.S., so it will be well positioned to benefit from a continued recovery here. As I wrote yesterday, I think the current round of selling in the world markets is overdone. The recent correction is based more on fear than any sort of realistic projection that the global economic recovery will halt in its tracks and reverse. Japan is likely to see less demand for its exports from Europe going forward, though, as the euro has weakened by about 15% against the yen so far this year. Increasing demand from Asia should help compensate for this loss, however. Asian destinations receive 55% of Japan's exports as opposed to 50% a year ago. The yen's performance against the dollar this year also indicates that there is a great deal of confidence in the currency in times of crisis. This suggests that although Japan has a hefty fiscal deficit, its government debt problems do not seem to concern the markets as much as the fiscal problems in Europe.