If you’ve ever had a conversation with me about investing, there’s a good chance that I mentioned exchange-traded funds (ETFs) at least once. For most investors, ETFs are all they need to accomplish their investing goals. They’re simple, accessible, and can save investors time and effort.
ETFs are always great options, but they can be even more valuable in September, a month known for historically underperforming. Of course, nobody can predict how the market will perform in any given month, and you shouldn’t invest trying to anticipate what will happen.
That said, certain ETFs are better equipped to weather downturns than others if they should happen, including the following two.
1. Invesco S&P 500 Equal Weight ETF
Many people are familiar with S&P 500 ETFs because they’re the most popular investments on the market. However, not as many people are familiar with equal-weighted ETFs, such as the Invesco S&P 500 Equal Weight ETF (NYSEMKT: RSP).
Most ETFs, including the most popular S&P 500 ETFs, are market cap weighted. This means larger companies account for more of the ETF than smaller ones. This ETF, however, is equal-weighted, so all companies within it account for roughly the same amount (it’s not perfectly even, but close enough).
Investing in this ETF gives you access to S&P 500 companies without being too dependent on a handful of companies’ success (or lack thereof). For perspective, here are the top five companies in the S&P 500 and how much of the index they make up (as of July 31):
|
Company |
Percentage of the S&P 500 |
|---|---|
|
Apple |
6.89% |
|
Microsoft |
6.70% |
|
Nvidia |
6.20% |
|
Amazon |
3.69% |
|
Meta Platforms |
2.24% |
Data source: Vanguard.
Just five companies make up over a quarter of the S&P 500, so the index — for the most part — follows them. On the flip side, the top five holdings of this ETF only make up 1.27% of the fund. A huge difference.
Being equal-weighted hasn’t weighed down the ETF, either. It’s still managed to produce impressive returns. Since its April 2003 inception, it has outperformed the market cap-weighted S&P 500.
2. Schwab U.S. Dividend Equity ETF
While growth stocks receive a lot of attention, dividend stocks can be just as valuable, especially over the long run. You can’t predict how stock prices will move, but you can count on your quarterly dividends to provide consistent income.
The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) is a great option for investors looking to add income to their stock portfolios. It mirrors the Dow Jones U.S. Dividend 100 index, which tracks high-dividend-paying companies with impressive dividend records.
This ETF’s dividend yield is routinely double that of the S&P 500. It started September with a 3.35% yield although, of course, that will change as the ETF price fluctuates. Since the ETF is dividend-focused, it’s concentrated in a handful of sectors known for dividends. Here are the five most represented sectors as of June 30:
-
Financials: 17.32%
-
Health Care: 15.53%
-
Consumer Staples: 14.28%
-
Industrials: 13.34%
-
Energy: 13.03%
It’s much more diversified than any of the three major U.S. indexes: the S&P 500, the Nasdaq Composite, and the Dow Jones. This helps protect against sector-specific downturns and the cyclical nature of sectors like financials, consumer discretionary (9.93% of the ETF), and industrials.
Here are the ETF’s top-five holdings and their dividend yields as of Sept.1:
|
Company |
Percentage of the ETF |
Dividend Yield |
|---|---|---|
|
Lockheed Martin |
4.52% |
2.22% |
|
AbbVie |
4.37% |
3.16% |
|
BlackRock |
4.20% |
2.26% |
|
Coca-Cola |
4.18% |
2.68% |
|
Home Depot |
4.12% |
2.44% |
Data source: Charles Schwab.
This ETF is being led by some of the strongest dividend stocks on the market. With the exception of Coca-Cola, they’ve all outperformed the S&P 500 over the past decade (including dividends).
This ETF includes companies with a history of paying above-average dividends, many of which have decades of annual dividend increases. It’s an ETF that income-seeking investors can feel comfortable buying into in September and beyond.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Stefon Walters has positions in Apple and Microsoft. The Motley Fool has positions in and recommends Amazon, Apple, Home Depot, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Lockheed Martin and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
2 ETFs That Are Screaming Buys in September was originally published by The Motley Fool