Some financial advisors are using low-volatility ETFs to manage risk in clients’ portfolios.
“In the period we’re in now, the marginal dollars going into stocks are coming from bond investors,” Doug Sandler at RiverFront Investment Group said in the Bloomberg article. “That investor doesn’t care about beating the S&P 500. He cares about keeping his risks down.”
Investors also need to be mindful of the sector concentration in low-volatility ETFs. For example, PowerShares S&P Low Volatility Portfolio has 30% in utilities and 29.5% in consumer staples. [Chart of the Day: Low Volatility ETF]
Other choices in the category include Russell 100 Low Volatility ETF (NYSEArca: LVOL) and iShares MSCI USA Minimum Volatility Index Fund (NYSEArca: USMV).