The capital markets have proven themselves to be stuck in volatile times as geopolitical uncertainty, and rising inflation continue to confound investors. That said, in these times of uncertainty, it’s imperative to have volatility protection.
Thankfully, there are exchange-traded funds (ETFs) to the rescue. Amid Russia’s invasion of Ukraine, ETFs are showing their mettle, and investors are using them now more than ever as the market environment gets more frantic.
State Street Global Advisors noted that ETF volumes are twice what they were before Russia invaded Ukraine. This was based on their 20-day average volume.
“We’ve seen time and again that when the market gets crazy, investors turn to ETFs as the vehicle of choice,” said CFRA Research’s Todd Rosenbluth, the firm’s senior director of ETF and mutual fund research in a CNBC interview.
“You can get out when you want to, you can get in when you want to, unlike in other markets or other vehicles, which is why we continue to see record inflows in the ETF marketplace,” added Rosenbluth.
An ETF to Help Tone Down the Volatility
Investors can opt for a number of strategies to help tone down the volatility, but they can have it all in one fund: the FlexShares US Quality Low Volatility Index Fund (QLV). With a 0.22% net expense ratio, the added low volatility feature doesn’t come at a high cost.
QLV tracks a proprietary index of U.S. companies that aims for a portfolio bias toward quality and reduced volatility. The index methodology first assesses financial strength and stability based on quality metrics like profitability, management efficiency, and cash flow. The lowest-scoring companies are excluded.
QLV seeks investment results that generally correspond to the price and yield performance, before fees and expenses, of the Northern Trust Quality Low Volatility Index. The underlying index is designed to reflect the performance of a selection of companies that, in aggregate, possess lower overall absolute volatility characteristics relative to the Northern Trust 1250 Index, a float-adjusted market capitalization-weighted index of U.S.-domiciled large- and mid-capitalization companies.
“The FlexShares US Quality Low Volatility Index Fund (QLV) is designed to provide exposure to US-based companies that possess lower overall absolute volatility, and that also exhibit financial strength and stability, which we believe are quality characteristics,” a FlexShares Fund Focus says.
For more news, information, and strategy, visit the Multi-Asset Channel.