ETFs May Offer a Lifeboat in Roiling Market

Government protection, 4.35% earnings are safe features financial advisors recommend.

Just when we thought we had figured out how to invest for a pandemic, along came the global financial collapse, followed by broken supply chains, soaring inflation, the biggest war in 60 years and the fastest rate hikes in decades.  

One could have been forgiven for thinking the worst was behind us. 

Well, things did get worse, when the worst banking disaster since the 2008 Great Recession hit. The collapse of Silicon Valley Bank and Signature Bank, the bailout of Credit Suisse and the rescue of First Republic brought a fresh tsunami to a financial system that had been tested multiple times in the past few years, and was due for a break.  

Investors generally aren’t in a mood for risk. Their financial advisors are echoing those sentiments. A safer investment with a lower return—heck, just not losing money would be nice—is fine for most investors, it seems. 

“I think investors are going to more heavily value safety,” Jason Siperstein, president of Eliot Rose Wealth Management in East Greenwich, Rhode Island, wrote in an email to etf.com. 

So far this month, safe investments have received the biggest amount of investor funds among ETFs, according to etf.com data. The SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) has pulled in $2.81 billion, followed by the iShares 7-10 Year Treasury Bond ETF (IEF), which took in $2.76 billion. 

Leading outflows was the SPDR S&P 500 ETF Trust (SPY), which saw $5.39 billion retreat this month. 

“When it comes to investing in the fixed income side of things, I am in favor of using ETFs as the vehicle rather than the underlying Treasuries themselves,” Eric Amzalag, owner of RIA Peak Financial Planning in Canoga Park, California, wrote in an email to etf.com. He said he likes the security provided by SIPC insurance. 

If rates fall, and after the banking bailouts and failures that may be a possibility, investors may want to consider the iShares 1-3 Year Treasury Bond ETF (SHY), he noted. Other recommendations are the iShares 3-7 Year Treasury Bond ETF (IEI) and the iShares 20+ Year Treasury Bond ETF (TLT). 

“Investors will need to be more tactical going forward,” he wrote. 

Siperstein recommended an investment in BIL, which he said is earning 4.35%. Another bonus? It’s “fully protected by the full faith and credit of the U.S. government. In this case, your entire investment is protected … there is no $250,000 limit.” 

Contact Ron Day at [email protected] or follow him on Twitter at @RonDayETF