With all of the negative stories in the news -- the U.S. unemployment rate above 9%, the debt ceiling debate, and talk of the dollar losing its status as the world’s reserve currency -- diversification is as important as ever for investors to limit their risk.

Investing in commodities, such as gold and silver, is a popular way to diversify a portfolio. However, going with the crowd is not always good investment strategy. Instead, I have identified an exchange-traded fund (ETF) that offers another way to diversify your portfolio, and it is the iShares Dow Jones Select Dividend Index (DVY).

This fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones Select Dividend Index. The ETF tracks an array of broad-based stocks, and thus it avoids placing too much of its financial capital in any one holding. 

Lorillard, Inc. (LO), for example, is one of the stocks tracked by DVY. The stock’s price dropped more than $18 per share from its opening in June, but recovered $14 dollars soon after, without having too much of an impact on DVY.

Dividends also help to protect DVY from volatility by providing additional profits even when stock prices are falling. Wharton Business School Professor Jeremy Siegel has researched equities going back decades and found that the best-performing investments for long-term periods are income-generating equities. DVY fits that description perfectly.

DVY also is a position that I have recommended in the past. The last time I closed an investment in DVY in my High Monthly Income portfolio, it finished up 20.45%. The current open position in DVY in my High Monthly Income portfolio, which I recommended in July, had an unrealized return of 19.68% when I checked it this afternoon.

Finally, if you want my advice about buying and selling specific ETFs, including appropriate stop losses, consider subscribing to my ETF Trader service. As always, I am happy to answer your questions, so do not hesitate to email me by clicking here. You just may see your question answered in a future ETF Talk.