Consumer ETFs to Weather the Storm

NEW YORK (TheStreet) - In recent months, investor confidence has been tested by a battery of disconcerting international events.

While it is natural to keep a close watch on these gripping news stories, it important to avoid letting day-to-day headlines influence your long term investing success. There are plenty of fears out there. However, bending and swaying with daily and hourly headwinds is a surefire way to increase confusion which may lead to unnecessary losses.

Investing in this trying economic environment requires a careful eye and a level-head. By gearing up with a strong, well diversified portfolio, investors can alleviate some of the anxieties that come with these volatile times and prepare for strength in the future.

The U.S. consumer, for instance, continues to be a pocket of strength amidst all of the turmoil. As pointed out by The Wall Street Journal, individual households have made great strides in paring back their debt loads as we have trekked along the road to recovery. According to the report total household debt in the U.S. currently stands at levels last seen in the closing months of 2004.

With their debt burdens easing, consumers are becoming increasingly willing to open their wallets as evidenced last week, when the February retail sales report showed a rise of 1% from the month previous.

On numerous occasions, I have encouraged investors to set aside a portion of their portfolio for funds directed towards tracking the ongoing domestic consumer recovery. Although we have seen a global shakeup in recent months, this thesis still holds true.

Investors looking for a way to tap into this region of the market can turn to a number of ETFs. Funds such as the SPDR S&P Retail ETF ( XRT) or the First Trust Dow Jones Internet Index Fund ( FDN) provide two unique ways investors can gain exposure to a wide range of retailers.

More conservative investors, on the other hand, may find the stability of the Consumer Staples Select Sector SPDR ( XLP) to their liking. XLP boasts exposure to firms responsible for providing individuals with the essentials. Top holdings include household names such as Procter & Gamble ( PG), Wal-Mart ( WMT) and Kraft Foods ( KFT).

The iShares Dow Jones Consumer Goods Index Fund ( IYK) spreads its assets across a wide range of companies hailing from the staples and discretionary regions of the consumer industry. This broad-based take on the consumer industry allows investors to profit from firms responsible for satisfying individuals' demand for both needs and wants.

The political unrest sweeping major regions of the Middle East and North Africa, the debt crisis facing the E.U., and, more recently, the tragedy facing Japan have made the international arena exciting to watch, though difficult to navigate from an investing perspective.

As the media and market commentators remain focused on the various headwinds facing tumultuous nations around the globe, investors may find welcomed relief here on our home shores. The U.S. recovery continues to hold promise and by gaining exposure to ETFs designed to target the domestic consumer, it is possible to defend against current global fears and prepare for strength when the skies clear down the road.

Written by Don Dion in Williamstown, Mass.

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At the time of publication, Dion Money Management owned First Trust Dow Jones Internet Index Fund and iShares Dow Jones Consumer Goods Index Fund.

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