On the eve of Thanksgiving, U.S. stock futures were already in the red following news of a new COVID-19 variant, which is a reminder of the need for low volatility protection.
“U.S. stock futures dropped in early morning trading on Friday as investors geared up for a shortened trading day amid renewed Covid fears over a new variant found in South Africa,” CNBC reports.
Meanwhile, the World Health Organization (WHO) held a special meeting to discuss the new variant. WHO reported that rising infections were already taking place in certain parts of the globe, with Europe being vulnerable early.
The European trading session was already seeing red as countries scrambled to try and cut off potential infections from entering their countries via travel restrictions. The United Kingdom, for example, was already suspending flights from six countries to mitigate risk of further infections.
COVID-19 UPDATE:@UKHSA is investigating a new variant. More data is needed but we’re taking precautions now.
From noon tomorrow six African countries will be added to the red list, flights will be temporarily banned, and UK travellers must quarantine.
— Sajid Javid (@sajidjavid) November 25, 2021
An ETF to Help Ease Volatility
One tool to help ease volatility is an exchange traded fund with the protection feature built into the fund, such as 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 correspond generally 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.
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