“A defining characteristic of minimum volatility … portfolios is that they seek to help smooth out the market’s peaks and valleys by holding low beta stocks — stocks that don’t typically exhibit excessive amounts of volatility compared with the broader market,” says Daniel Morillo, global head of investment research at iShares. [Low-Volatility ETFs: A Flavor for the Behavior of Low Beta]
Investors have also utilized dividend ETFs as a buffer against market risk. The some dividend ETFs have even shown low levels of volatility because of the way their underlying indices are constructed.
For instance, the WisdomTree Emerging Markets Equity Income (NYSEArca: DEM) “has outperformed the MSCI emerging Markets Index by early 6% with lower volatility over the past five years by tilting toward dividend-paying stocks,” Goldsborough said in the article.
Goldsborough also points out that WisdomTree LargeCap Dividend (NYSEArca: DLN) has returned 0.96% over the last five years, or a little below the S&P 500 Index, but with lower volatility by weighting stocks according to total dividends paid, which results in a value tilt. [Dividend ETFs to Reap Record Quarterly Payout]
Other dividend ETFs include iShares Dow Jones Select Dividend Index Fund (NYSEArca: DVY), iShares High Dividend Equity Fund (NYSEArca: HDV), SPDR S&P Dividend ETF (NYSEArca: SDY), Vanguard Dividend Appreciation ETF (NYSEArca: VIG), Vanguard High Dividend Yield Index Fund (NYSEArca: VYM) and WisdomTree Dividend Top 100 Fund (NYSEArca: DTN).
For more information on dividend or low-volatility funds, visit our dividend ETFs category or low-volatility category.
Max Chen contributed to this article.