How a Low-Volatility Strategy Can Help Mitigate Risk | ETF Trends

With potentially big market swings and uncertainty ahead, many investors are reducing their market exposure to de-risk their asset allocation strategy. Instead, they could consider a low-volatility equity core strategy to help hedge against further market swings and stay invested.

In the upcoming webcast, How a Low-Volatility Strategy Can Help Mitigate Risk, Chris Dahlin, Factor & Core Equity Strategist, ETFs and Indexed Strategies, Invesco, will explain the potential benefits of a low-volatility strategy in an uncertain market environment to help financial professionals manage risk in the core investments of their clients’ portfolios.

Specifically, the Invesco S&P 500® Low Volatility ETF (SPLV) underlying S&P 500 Low Volatility Index is compiled, maintained, and calculated by Standard & Poor’s and consists of the 100 securities from the S&P 500® Index with the lowest realized volatility over the past 12 months.

SPLV is a “‘pure’ approach to the low-volatility potential advantage. Not all low-volatility approaches are the same,” according to Invesco. “Invesco S&P 500 Low Volatility ETF (SPLV) provides access to the low volatility factor with no sector constraints. It’s a simple and transparent approach that allows SPLV’s underlying index to rotate out of the most volatile sectors at each quarterly rebalancing to provide the potential for upside participation and enhanced risk mitigation.”

The Invesco S&P MidCap Low Volatility ETF (XMLV) consists of 80 out of 400 medium-capitalization securities from the S&P MidCap 400 Index, with the lowest realized volatility over the past 12 months.

Lastly, the Invesco S&P SmallCap Low Volatility ETF (XSLV) consists of 120 out of 600 small-capitalization securities from the S&P SmallCap 600 Index, with the lowest realized volatility over the past 12 months.

“While highly volatile stocks may indeed deliver bursts of impressive performance, academic research has found that lower-volatility stocks have historically generated better risk-adjusted returns over time. This is known as the ‘low-volatility anomaly,’ and it’s the reason why many long-term investors have included low-volatility factor strategies in their portfolios,” according to Invesco.

Financial advisors interested in learning more about the low-volatility strategy can register for the Tuesday, November 8 webcast here.