iQ S&P 500 Defensive Sector Model
INVESTMENT OBJECTIVE
The iQ S&P 500 Defensive Sector Model is an annual model that seeks to outperform the S&P 500 index by selecting 20 stocks based on Value Momentum, Share Buyback and Operating Earnings Yield.
PROCESS
The iQ S&P 500 Defensive Sector Model selects its holdings based on the following rules-based investment process:
Starting Universe = The S&P 500 Index
Eliminate any stock that is not from the following sectors and/or industries:
Utilities
Aerospace
Healthcare
Consumer Staples
Telecommunications
Real Estate Investment Trusts
Sort the remaining companies by Value Momentum plus Share Buyback Yield and select the top 60.
Sort the remaining 60 companies by Operating Earnings Yield and select the top 20 stocks.
Re-constitute every calendar year.
This model reconstitutes the first trading day of each February.
Why invest in defensive stocks?
Investing in defensive stocks is a strategy that involves buying stocks of companies that are expected to perform well during economic downturns or periods of market volatility. These companies are often characterized by stable earnings, consistent dividend payouts, and a business model that is less sensitive to changes in the economy.
Defensive stocks typically include companies in sectors such as utilities, consumer staples, healthcare, and telecommunications. These sectors are known for providing products and services that are essential to consumers, regardless of the economic climate.
Investing in defensive stocks can provide several benefits, including:
1. Stability: Defensive stocks tend to be less volatile than other types of stocks, making them a good choice for investors who are seeking a stable, predictable return on their investment.
2. Income: Many defensive stocks pay consistent dividends, providing investors with a reliable stream of income regardless of market conditions.
3. Diversification: Defensive stocks can provide diversification to an investor's portfolio, as they may perform differently than other types of stocks during market downturns.
4. Long-term growth: Although defensive stocks may not experience the same level of growth as high-growth stocks, they can still provide long-term growth and appreciation in value over time.
Overall, investing in defensive stocks can be a good strategy for investors who prioritize stability and consistent returns over high-risk, high-reward investments.