NEW YORK (TheStreet) -- Throughout the market's early year run up, investors who have ventured into risk have seen the strongest returns.Major U.S. stock indices are pushing to historical highs while emerging market ETFs like the Vanguard Emerging Market ETF ( VWO) and the iShares MSCI Emerging Market Index Fund ( EEM) have managed to lock in returns of more than 10% returns. On the other side of the coin, interest in the defensive asset classes that proved so attractive during the troubled second half of 2011 has fallen by the wayside. During the middle of March, the bottom dropped out for U.S. government-issued debt securities and funds including iShares Barclays 20+ Year Treasury Bond Fund ( TLT) and the iShares Barclays 7-10 Year Treasury Bond Fund ( IEF) slipped to new 2012 lows.
Blind bullishness is dangerous and, therefore, aggressive and conservative investors should have these factors in mind when prepping their portfolios for the road head. Dividend-paying equity ETFs like the iShares Dow Jones Select Dividend Index Fund ( DVY) or the Vanguard Dividend ETF ( VIG) offer jittery investors a chance to maintain stock exposure while protecting against a potential correction. Meanwhile, investors can boost their level of safety by paring back exposure to excessively risky emerging markets. Single nation products like the iShares MSCI Thailand Investable Market Index Fund ( THD) or the Market Vectors Brazil Small Cap Index ETF ( BRF) may be enticing during periods of relentless upward action. However, if clouds gather, instruments like EEM and VWO may be better choices. Their globally diversified investing strategies can help mitigate downward action. The road ahead may not be perfectly smooth, but ultimately I do not feel that we should be heading for the exits here. By refocusing attention towards slightly less risky instruments, it is possible for even the most fearful investors to ride out a potential squall. Written by Don Dion in Williamstown, Mass. Readers Also Like: >> 18 Dividend Stocks That Will Outlive the Hype >> Time to Invest in Industrials