In the past year, investors have loaded up on a combination of gold, silver, and Bitcoin in the hopes of being able to find safe-haven investments they can safely store their money in, amid economic and geopolitical uncertainty. The problem with those types of investments is that they are highly speculative in nature and have been fairly volatile over the past several months.
You can still invest in stocks to reduce your market risk; the key is to select the right types of stocks. Even the S&P 500 may be a bit risky these days due to its dependence on the top tech stocks. If they fall, the index will be susceptible to a steep correction as well.
Instead of those options, you may want to consider the Vanguard Utilities ETF (VPU 1.68%). Here's why it can be an ideal safe-haven investment to add to your portfolio if you're worried about the stock market and rising valuations.
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Utility stocks can be relatively safe and dependable investments
Utility companies may not often generate much in the way of growth, but they do bring in a steady stream of recurring income because their customers need their services on a regular basis. While there may be some volatility if there are adverse weather conditions, generally, there's a great deal of predictability when it comes to these types of businesses.
With the Vanguard Utilities ETF, you're getting exposure to a broad mix of utility stocks, including those involved with electricity, gas, water, and renewables. Its top holdings feature many of the best-known utility stocks on the market: NextEra Energy, Southern Company, and Duke Energy.
By having exposure to these blue chip stocks, you can enjoy the consistency and dependability that they offer. The Vanguard fund has averaged a beta of 0.59 over the past five years, which effectively tells you it's much less volatile than the overall market (a beta of 1.0 would mean that it follows the market closely).
NYSEMKT: VPU
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The fund's low fees and above-average yield sweeten the deal
An attractive feature of Vanguard funds is their low fees, and the Vanguard Utilities ETF is no exception; its expense ratio is just 0.09%. Meanwhile, it pays a dividend that yields 2.5%, which is more than double the rate of the average S&P 500, which is around 1.1%.
This year, the Vanguard fund is up around 5%, and that rises to more than 6% when factoring in its dividend. If you're looking to reduce your risk in the markets, investing in this ETF can be a great option to consider right now.
