The recent tech and cryptocurrency sell-off are sparking more fear of market volatility ahead, putting value-based ETFs in focus.
Value equities can help mute the volatility with their decreased sensitivity to extreme market swings. It’s one of the reasons they’ve been preferred over growth equities so far in 2021.
“Growth has outperformed value over the past decade – apart from a brief period in 2016 when value sharply but briefly outperformed,” a Capital.com article said. “Since then, growth has rallied strongly, driven primarily by a handful of mega-cap darlings. This resulted in the widest valuation spreads between growth and value on record.”
A Trio of Value Funds
One fund to consider is the Vanguard Value ETF (VTV). With its low expense ratio of 0.04%, VTV comes at a relative bargain.
VTV exhibits the typical characteristics of a value-based fund that primarily houses large cap stocks. When markets are pushing higher, it can capture upside while muting the effects of volatility whenever there’s downward selling pressure.
The ETF is never too heavy in one particular stock. In fact, its vast holdings shield against concentration risk while also providing diversification across a spectrum of sectors.
Next up is the iShares Russell 1000 Value ETF (IWD). IWD seeks to track the investment results of the Russell 1000® Value Index, which measures the performance of large- and mid-capitalization value sectors of the U.S. equity market.
The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. It may invest the remainder of its assets in certain futures, options and swap contracts, cash, and cash equivalents, as well as in securities not included in the underlying index, but which the advisor believes will help the fund track the underlying index.
Lastly, there’s the SPDR Portfolio S&P 500 Value ETF (SPYV). The fund seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P 500 Value Index that tracks the performance of large capitalization exchange traded U.S. equity securities exhibiting “value” characteristics.
The fund employs a sampling strategy in seeking to track the performance of the S&P 500 Value Index. It generally invests substantially all, but at least 80%, of its total assets in the securities comprising the index, which measures the performance of the large-capitalization value segment of the U.S. equity market.
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