Bear markets are scary. Most portfolios take a beating when the economy contracts, and it gets really bad for growth investors.
If you’re young, the best thing is to usually buy and hold during a bear market. However, if you’re an older investor, you may want some stability during a bear market. Less volatility makes bear markets less punishing for your portfolio.
You can minimize the downside of a bear market without sacrificing long-term returns. You don’t have to stuff your money into high-yield bonds that barely budge when the market is soaring. These Fidelity ETFs offer a good mix of bear market protection and long-term growth prospects.
Fidelity High Dividend ETF (FDVV)
If you want to reduce your losses during market corrections while having room for growth, high-yield dividends are a good place to start. These mature companies offer high yields and don’t fluctuate as much as growth stocks.
The Fidelity High Dividend ETF (NYSEARCA:FDVV | FDVV Price Prediction) is loaded with these types of stocks. It has more than 100 stocks and only has one-quarter of its funds invested in tech stocks. The fund’s growth opportunities are at the top of its asset allocation. Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA), and Apple (NASDAQ:AAPL) are the top three holdings, and they make up more than 15% of the fund’s total assets.
However, you will find a bunch of blue-chip stocks for the rest of the fund. That’s why the fund has a 3% yield despite having more than 15% of its assets in stocks that are known for high growth and low yields. This blend has resulted in an annualized 17.0% return over the past five years.
Fidelity Blue Chip Value ETF
The Fidelity Blue Chip Value ETF (BATS:FBCV) is another Fidelity ETF that’s worth a closer look for people who want to minimize their losses during bear markets. The fund has produced an annualized 12.2% return over the past five years and comes with a 0.59% expense ratio. You’ll also enjoy a 1.70% yield.
Most of the fund’s 106 stocks are large-cap value stocks. Exxon Mobile (NYSE:XOM), Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B), and Cigna (NYSE:CI) are the top three holdings, and they make up a little more than 10% of the fund’s total assets. FBCV is quite diversified, with only 28% of its assets going into its top 10 holdings.
Tech makes up less than 10% of the fund’s total assets, and that sector usually gets hit the hardest during bear markets. Financial services is the largest segment, making up roughly 25% of the fund’s positions.
Fidelity Value Factor ETF (FVAL)
The Fidelity Value Factor ETF’s (NYSEARCA:FVAL) 1.52% yield is more than enough to cover its 0.16% expense ratio, but its returns extend well beyond the dividend. This Fidelity ETF has delivered an annualized 14.9% return over the past five years.
Tech makes up almost one-third of the fund’s holdings, with the Magnificent Seven stocks leading the way. Microsoft, Nvidia, and Apple are the top three holdings, and they make up more than 20% of the fund’s total assets.
Out of the three Fidelity ETFs, this one performed the worst in 2022, but it only shed 16% of its value during that year. Why is 2022 important? That was the last bear market, which featured record inflation, substantial interest rate hikes, and plenty of meltdowns from pandemic darlings that rose to prominence in the year before.
This Fidelity ETF did relatively well in 2022 and has demonstrated that it can generate attractive long-term returns.
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