Therefore, investors need to be careful when buying popular dividend or low-volatility ETFs because they may already have similar exposure.
“On the other hand, as skeptical as I tend to be about some approaches to marketing mutual fund products … it’s hard to be too cranky when the trend is toward lower-volatility, higher-quality funds,” Zimmerman added.
Vanguard, the top-selling ETF firm this year, says it is considering launching its own low-volatility products. [Vanguard Mulls Low-Volatility ETFs as Category Thrives]
Low-volatility ETFs have attracted nearly $4 billion in 2012. Funds in the category include PowerShares S&P 500 Low Volatility (NYSEArca: SPLV), iShares MSCI All Country World Minimum Volatility (NYSEArca: ACWV), iShares MSCI USA Minimum Volatility (NYSEArca: USMV), iShares MSCI Emerging Markets Minimum Volatility (NYSEArca: EEMV), PowerShares S&P International Developed Low Volatility (NYSEArca: IDLV) and PowerShares S&P Emerging Markets Low Volatility (NYSEArca: EELV).
Dividend ETFs, which as a group have hauled in more than $10 billion this year, include WisdomTree Emerging Markets Equity Income (NYSEArca: DEM), Vanguard Dividend Appreciation (NYSEArca: VIG), iShares Dow Jones Select Dividend Index Fund (NYSEArca: DVY), iShares High Dividend Equity Fund (NYSEArca: HDV), SPDR S&P Dividend ETF (NYSEArca: SDY), Vanguard High Dividend Yield Index Fund (NYSEArca: VYM), WisdomTree Dividend Top 100 Fund (NYSEArca: DTN), PowerShares International Dividend Achievers (NYSEArca: PID) and First Trust Morningstar Dividend Leaders (NYSEArca: FDL). [Dividend ETFs Under the Microscope]
Full disclosure: Tom Lydon’s clients own DVY.