The markets have been rallying of late on news that inflation wasn't as bad as feared in October. However, the bear market could be far from over as there are still fears of a recession coming next year. For investors looking to minimize their risk, a good option is to invest in a consumer staples and low volatility investments.
That's where the iShares U.S. Consumer Staples ETF (NYSE Arca:IYK) comes into play. Down a modest 2% this year, it has made for a decent investment, especially when compared to the S&P 500, which is down more than 15% in 2022. Plus, the Consumer Staples ETF yields more than 2% and can boost investors' overall returns through the recurring income that it generates.
The fund holds some of the safest names you can buy, including Procter & Gamble (NYSE:PG), PepsiCo (NASDAQ:PEP), and Coca-Cola (NYSE:KO). Those three stocks account for 38% of the ETF's total weight. There are a total of 52 holdings in the fund and they average a price-to-earnings multiple of 23 and a price-to-book multiple of 4.
Food, beverage, tobacco, household, and healthcare are the key segments of the economy that the fund invests in. Collectively, those areas can provide some good diversification for investors as those are items that are necessities for consumers, and businesses with exposure to those sectors could perform better than others amid a downturn.
The ETF charges a modest expense ratio of 0.39%, which is lower than many other funds. While there may not be impressive growth opportunities with this fund, the U.S. Consumer Staples ETF is a great option for risk-averse investors.
