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Volatility: Use your “explore” investments to tame it

November 11, 2021 Robb Engen
Volatility: Use your “explore” investments to tame it

Further, emerging markets could be a key driver of global economic growth over the next few decades and may offer compelling long-term growth prospects for Canadian investors. Investors who want to capitalize on powerful consumer trends within key markets, particularly Asia, that may be overlooked by index-based emerging markets strategies, could consider the recently launched Horizons Emerging Markets Leaders ETF (HEMC).

Semiconductors: By now, we’ve all heard that one of the main causes of inflation and supply chain bottlenecks is the global semiconductor shortage. The U.S. administration under President Joe Biden announced earlier this year that it would set aside US$50 billion to expand domestic manufacturing of semiconductor chips.

In June 2021, Horizons ETFs launched Canada’s first semiconductor ETF: Horizons Global Semiconductor Index ETF (TSX: CHPS), which holds some 50 companies, including NVIDIA Corp., Taiwan Semiconductor Manufacturing Co., Intel Corp., Texas Instruments Inc. and Qualcomm Inc., to name a few.

Commodities: It can make sense to own commodities, like gold and crude oil, in your portfolio to counter the impact of rising inflation. Commodities can also be negatively correlated with stocks, giving investors a hedge against falling markets. Investors can add physical gold, invest directly in gold stocks, or invest in a gold ETF.

Investors can also consider putting money into commodity futures like crude oil or natural gas to take advantage of those rising prices. And yes, there are ETFs for that.

Corporate bonds: If the threat of rising interest rates is keeping you up at night, consider delving into the world of corporate bonds. While they’re riskier than long-term government bonds, corporate bonds could hold up better if interest rates go up, because of their higher yields.

Bonds aren’t exciting anyone these days, but short-duration corporate bonds have outperformed aggregate bonds, long-term federal bonds and short-term government bonds this year. And they should be poised to continue to outperform if interest rates keep ticking upwards. The Horizons Active Ultra-Short Term Investment Grade Bond ETF (HFR) is a high-grade corporate bond ETF designed to pay a higher yield as interest rates rise, which seems ideal for this situation.

What explore-type investments mean to investors right now

Investors are justifiably concerned about markets these days. The COVID-19 pandemic has caused unprecedented disruption in the global economy. We haven’t seen this movie before, so we don’t know how it’s going to end.

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