If stocks continue to fall and we’re into a prolonged bear market, it’s going to be difficult to find safe investments to hold in your portfolio. One way to minimize your risk is to diversify and hold an exchange-traded fund (ETF).
But many ETFs, especially those which track the S&P 500, may not be all that safe given their elevated valuations. This is where focusing on funds that prioritize value and fundamentals may be a better option for investors. One ETF that could fit that criteria well is the Invesco RAFI US 1000 ETF (NYSE Arca:PRF).
The ETF holds over 1,000 stocks, and focuses on those with the strongest fundamentals, based on their book values, cash flow, sales, and dividends. Currently, the fund averages a price-to-earnings multiple of 17, and a price-to-book multiple of 2.5.
Its portfolio offers investors some good diversification with financials accounting for 21% of its holdings, followed by healthcare at 12% and tech at 12%. Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT) are its top three holdings, but no stock accounts for more than 3% of the ETF’s overall weight. This is important for investors as it means there isn’t heavy exposure to any one particular stock. The ETF pays a dividend which yields around 1.9%.
While it hasn’t been able to avoid the market’s downturn this year, the ETF has still proven to be a better investment than the S&P 500. Even when including dividends, the S&P 500 is down around 10% this year. The Invesco fund, however, has fallen by more than 7% when including dividends. For investors who want some safety and a way to reduce their risk, this ETF could make for a good option to hang on to both in the short term and the long term.
