With the sudden bout of volatility shaking up the markets from its listless first half, more conservative investors may consider exchange traded funds that track a low-volatility strategy.
Market watchers argue that investors should get use to stock volatility as it is here to stay for some time, reports Michelle Fox for CNBC.
Fueling the risk, the escalation in the Greek debt crisis and a major sell-off in Chinese markets sent global markets reeling.
“People are not taking a lot of risk right now. There are too many cross-currents right now to really take a big position out there,” Brian Kelly, founder of Brian Kelly Capital, said on CNBC. “Yes, potentially we get some kind of deal in Greece but then it’s unclear exactly what the damage has been done in China.”
Consequently, retail investors have been hesitant on joining the market as market swings remain a major concern.
Nevertheless, there are a number of low-volatility ETFs available that track more steady segments of the markets. For instance, over the past month, the PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV), which tracks the 100 least volatile stocks on the S&P 500, rose 1.3% and the iShares MSCI USA Minimum Volatility ETF (NYSEArca: USMV), which selects stocks based on variances and correlations, along with other risk factors, rose 0.9%. In contrast, the S&P 500 has declined 1.2% over the past month.