2 ETFs that scream buy in September

If you’ve ever had a conversation with me about investing, there’s a good chance you’ve mentioned exchange-traded funds (ETFs) at least once. For most investors, ETFs are all they need to meet their investment goals. They are simple, affordable 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 poor performance. Of course, no one can predict how the market will perform in a given month, and you should not invest by trying to predict what will happen.

That said, certain ETFs are better equipped to handle recessions than others if they should happen, including the following two.

1. Invesco S&P 500 Equal Weight ETF

Many people are familiar S&P 500 ETFs because they are the most popular investments on the market. However, not as many people are familiar with equal-weight ETFs such as Invesco S&P 500 ETF Equal Weight (RSP -0.61%).

Most ETFs, including the most popular S&P 500 ETFs, are market capitalization weighted. This means that larger companies represent more of the ETF than smaller ones. This ETF, however, is equally weighted, so all companies within it represent roughly the same amount (not perfectly equal, but close enough).

Investing in this ETF gives you access to S&P 500 companies without being overly dependent on the success (or lack thereof) of a few companies. 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):

Data source: Vanguard.

Just five companies make up more than a quarter of the S&P 500, so the index — for the most part — tracks them. On the other hand, this ETF’s top five holdings represent just 1.27% of the fund. A huge difference.

Being equally weighted didn’t weigh the ETF down either. It still managed to produce impressive profits. Since its inception in April 2003, it has outperformed the market-cap-weighted S&P 500.

RSP Total Return Level data by YCharts

2. Schwab US Dividend Equity ETF

While growth stocks get a lot of attention, dividend stocks can be just as valuable, especially over the long term. You can’t predict how stock prices will move, but you can rely on your quarterly dividends to provide consistent income.

The Schwab US Dividend Equity ETF (SHD -0.95%) is an excellent option for investors looking to add income to their equity portfolios. reflects Dow Jones US Dividend 100 index, which tracks high dividend-paying companies with impressive dividend records.

This ETF’s dividend yield is typically double that of the S&P 500. It started in September with a yield of 3.35%, though of course that will change as the ETF’s price fluctuates. Because the ETF is dividend-focused, it is concentrated in a handful of sectors known for dividends. Here are the five most represented sectors on June 30:

• Financial: 17.32%
• Healthcare: 15.53%
• Consumer products: 14.28%
• Industrial industry: 13.34%
• Energy: 13.03%

It is far more diversified than any of the three major US indices: the S&P 500, Nasdaq Compositeand Dow Jones. This helps protect against sector-specific downturns and the cyclical nature of sectors such as financials, consumer discretionary (9.93% of the ETF) and industrials.

Here are the top five ETF holdings and their dividend yields as of September 1:

Data source: Charles Schwab.

This ETF is driven by some of the strongest dividend stocks on the market. Except for Coca-Cola, all have outperformed the S&P 500 over the past decade (including dividends).

LMT Total Return Level data by YCharts

This ETF includes companies with a history of paying above-average dividends, many with decades of annual dividend increases. It’s an ETF that income investors can feel comfortable buying in September and beyond.