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5 ETFs to Play in April

With the passage of Q1, everyone may have shifted attention to Q2 but given the heightened volatility in the global market and new shocks or surprises every day, taking a near-term approach may be warranted. Thus, for investors looking for the prospective winners of the first month of Q2, we will highlight a few investing options.

In any case, April is historically known for stellar returns. The average return of the S&P 500 was 1.36% in April, from 1950 to 2015. There were 45 years of a green April while returns were in the red only in 21 years. As per, only December beat out April in terms of returns.

Of course, innate concerns over global growth and oil price declines have the potential to derail this stunning historical performance this year. But with such a heavy sell-off in the first two months of 2016 and occasional retreats afterward, chances of a solid rebound are high at the current level.

Following are a few ETFs that either offer safety and or have the potential to grow after a beaten-down Q1.

Low-Beta – PowerShares Russell 1000 Low Beta Equal Weight ETF (USLB)

The fund comprises 307 stocks that exhibit relatively low beta. Plus, the stocks have negligible concentration risk and are weighted equally. Beta measures the price volatility of the stocks/funds relative to the overall market. A stock with a high beta tends to be more volatile than the market and vice versa. Thus in a choppy market, low beta ETFs offer greater safety. Financials (21.3%) and consumer discretionary (16.3%) are top two sectors of the fund. The fund charges 35 bps in fees.

Technology – SPDR S&P Software & Services ETF (XSW)

Investors should note that technology stocks and ETFs had a sluggish Q1. Though the space is yet to return with full force, a few corners of it are showing promise. Among the few, computer software and the services segment are worth a mention. The segment is expected to post 11.6% growth in the first-quarter 2016 earnings season, which is quite noteworthy given the negative growth rates projected for the other tech segments (apart from telecommunication services).

Investors can thus have a look at XSW which targets the software sub-industry portion of the S&P Total Stock Market Index. The Software Index is a modified equal weight index. The 174-stock fund charges 35 bps in fees. Notably, this Zacks Rank #2 stock has lost 5.6% so far this year (as of April 4, 2016) and may be poised for a reversal in Q2.

Transportation – SPDR S&P Transportation ETF (XTN)

This is a risky play as the transportation ETF XTH has a Zacks ETF Rank #4 (Sell). However, with oil prices southward and touching the $35 level, transportation ETFs like XTN should get a boost.

Plus, the transportation sector is among the few (under the coverage of the 16 sectors of the S&P 500 index) which is expected to post earnings growth this season. Moreover, the sector is undervalued in nature. XTN does not have meaningful company concentration risks and charges 35 bps in fees (read: Profit From Sub-$40 Oil with These ETFs).

Fixed-Income – PIMCO Diversified Income Active ETF (DI)

With easy money polices dominating the developed economies and the Fed proceeding slowly with the rate hike procedure, fixed income investing should be in play throughout April (read: Best Performing Bond ETFs of Q1).

This actively managed ETF, DI, provides a broad exposure to the global credit markets. Its investment process adopts top-down & bottom-up strategies, helping investors to access global credit. The exposure is quite symmetrical across the globe with European Monetary Union taking the top spot with 9.25% followed by UK (8.14%) and Russia (5.45%).

The fund gives exposure to short duration emerging market bonds, investment grade credits, U.S. treasuries and may other instruments. The fund charges 85 bps in fees and its 30-day SEC yield (as of April 1, 2016) is 4.51%.

O'Shares FTSE US Quality Dividend ETF (OUSA)

The dividend ETF seeks to track the performance of the FTSE U.S. Qual-Vol-5% Capped Factor Index. The index is designed to measure the performance of large and mid-cap dividend-paying issuers in the U.S. which were screened on the basis of high quality, low volatility and dividend yield. In the present era of low-yield, this high quality dividend ETF should go a long way in boosting investors’ wealth. OUSA yields 1.55% annually and charges 48 bps in fees (read: High Dividend Sector ETFs Hitting All-Time Highs).

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PWRSH-RU LBEWP (USLB): ETF Research Reports
SPDR-SP SOF&SER (XSW): ETF Research Reports
SPDR-SP TRANSPT (XTN): ETF Research Reports
PIMCO-DIVRS INC (DI): ETF Research Reports
OSHRS-FT QL DV (OUSA): ETF Research Reports
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