Major U.S. stock market benchmarks declined for the third consecutive month in October.
U.S. equities struggled last month due to volatile and increasing bond yields, third-quarter earnings reports, and geopolitical conflict. Notably, last month marked the worst October for the S&P 500 and the Dow Jones Industrial Average since 2020, and the worst October since 2018 for the Nasdaq Composite.
For investors who want to maintain equity exposure but limit downside risk, the Hartford Multifactor US Equity ETF (ROUS) may be worth consideration. The fund is a defensive value ETF designed to provide exposure to the U.S. equity market with potentially less volatility than traditional cap-weighted indexes.
The defensive value ETF has managed to limit losses for investors in the current environment. ROUS has outpaced the S&P 500 by 151 basis points since August 1. During the same period, the fund has outperformed the Russell 1000 Value by nearly 300 basis points.
See more: “Should Investors Avoid Small-Caps?”
How ROUS Seeks to Provide Downside Protection
ROUS targets certain desired return-enhancing factors while reducing unrewarded risk exposure.
The defensive value ETF allows investors to maintain target equity exposure more comfortably during choppy markets as it targets lower volatility stocks. The fund seeks to outperform traditional cap-weighted indexes and reduce volatility by 15% over a full market cycle.
ROUS is an ideal fit for investors looking to dampen volatility and position defensively. Many investors are currently holding cash on the sidelines, wary to get back into equities. ROUS can serve as a solution, allowing investors to access equity markets with potentially fewer drawdowns than benchmarks.
Conversely, some investors may have existing allocations to equities but want to smooth out volatility. ROUS can serve as a core equity holding in that instance too, helping to position portfolios for continued volatility and recession.
For more news, information, and analysis, visit the Multifactor Channel.
Investing involves risk, including the possible loss of principal.
This article was prepared as part of Hartford Funds paid sponsorship with VettaFi. Hartford Funds is not affiliated with VettaFi and was not involved in drafting this article. The opinions and forecasts expressed are solely those of VettaFi. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, a recommendation for any product or as investment advice.