Inflation, the Russia-Ukraine conflict, and the threat of rising interest rates are all likely on investors' minds right now. It can be difficult navigating between what is and isn't a good investment.
For investors worried about the stock market turmoil, investing in a couple of exchange-traded funds (ETFs) can help keep your risk down while still profiting from long-term gains in popular stocks. Two funds that investors may want to focus on today are iShares U.S. Pharmaceuticals ETF (IHE -0.69%) and VanEck Morningstar Wide Moat ETF (MOAT 0.44%)
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1. iShares Pharmaceuticals ETF
The pharmaceutical industry is a good place hold your money. Not only can you earn a solid dividend that yields 1.3% and is in line with the S&P 500 average, but you'll also have exposure to some of the top healthcare stocks in the world.
This is a low-volatility fund that won't move erratically with the markets. For investors seeking stability, it makes for a good investment to buy and forget. Over the past year, the fund's total returns (including dividends) are around 8.5%, below the S&P 500's total returns of 14%. Investors sacrifice some more upside with the fund but gain more stability in return.
iShares Pharmaceuticals has 44 holdings in its fund, and the stocks are fairly priced, trading at an average price-to-earnings (P/E) ratio of 17. That's cheap compared to the S&P 500, where stocks are trading at an average earnings multiple of 24.
Inside the fund, you'll find many of the top names in the pharmaceuticals industry with Johnson & Johnson and Pfizer accounting for 23% and 21% of the total portfolio's weight, respectively. That's a large chunk for two stocks to take up in an ETF, but they're also among the more stable healthcare business you can invest in. The only other stock that accounts for more than 5% of the fund's weight is Bristol Myers Squibb, which comes in as the third-largest stock, accounting for 5.5% of the total holdings.
Healthcare is essential regardless of what's going in the world, and that's what can make this a safe investment to hold on to for the very long haul.
2. Van Eck Morningstar Wide Moat ETF
If you crave a bit more growth, consider the Van Eck Morningstar Wide Moat ETF. A company with a "wide moat" has a sustainable competitive advantage that allows its business to fend off competition. Thus, the Wide Moat fund focuses on U.S. companies it believes have such moats, making them attractive long-term investments. The fund also pays a yield of just over 1.2%.
At 47 holdings, this ETF is similar in size to the Pharmaceuticals ETF but it is much more diverse. For one thing, no one stock makes up for even 4% of its net assets; the largest holding is energy infrastructure company Cheniere Energy, which accounts for 3.8%. Bristol Myers is also among the top stocks in the fund as is top bank Wells Fargo.
The largest segment in the fund belongs to tech stocks, which make up just over one-fifth of all net assets (22.8%), following by healthcare (16.5%), industrials (15.5%), and consumer staples (14.7%). No other segment makes up 10%.
The average P/E ratio for the fund is 21 as of Jan. 31 -- and given the recent bearishness in the market, that multiple is likely lower now. The Wide Moat ETF is also slightly more volatile than the Pharmaceuticals ETF as it closely tracks the performance of the broader market. Over the past 12 months, its total return is up over 10%, performing slightly better than the healthcare-focused fund.
Together, investing in both the Pharmaceuticals ETF and Wide Moat ETF can give investors a good mix of growth and stability. And with both funds focused on U.S.-based businesses, which can also reduce investors' exposure to geopolitical risks.
