Now that election season is here, investors may have forgotten about the series of spending cuts and tax hikes that could take place in January 2013. If a last-minute compromise doesn’t materialize between the election and the New Year, investors need to have a backup plan, according to an article published by ETF Trends.
Here are reasons investors should fear the possible “fiscal cliff,” according to ETF Trends:
- It poses a potential threat to the economic recovery. While exact estimates differ, the economic impact is likely to be over $600 billion, or roughly 4 percent of GDP.
- It would hit at a time when the economy is still in the midst of a fragile recovery, with U.S. gross domestic product growing by 1.7 percent.
- It will hit the economy where it is most vulnerable: consumer spending. Should the fiscal cliff hit on schedule, it’s likely to lead to at least a modest economic contraction next year.
To mitigate the effects of the fiscal cliff, seek out exposure to large-cap equity funds with some low-volatility choices, such as the ones outlined below:
- iShares MSCI All Country World Minimum Volatility Index Fund (NYSEArca: ACWV)
- iShares S&P Global 100 Index Fund (NYSEArca: IOO)
- iShares High Dividend Equity Fund (NYSEArca: HDV)
- iShares Dow Jones International Select Dividend Index Fund (NYSEArca: IDV)
Visit ETFtrends.com to read more.