Some exchange traded funds offer investors the ability to generate income while reducing portfolio volatility. The VictoryShares US Large Cap High Div Volatility Wtd ETF (NasdaqGM: CDL) is one of the more compelling options in that mix.
The VictoryShares volatility weighted approach should not be confused with low-vol strategies, which are designed to capture excess returns to stocks with lower-than-average volatility, beta, and/or idiosyncratic risk.
CDL tracks the highest 100 dividend yielding stocks of the CEMP U.S. Large Cap 500 Volatility Weighted Index with four quarters of positive earnings and are weighted based on their daily standard deviation, or volatility.
“That index has some requirements that can help reduce risk. Components are weighted by their standard deviation over the past 180 days and are required to be earnings positive for at least four consecutive quarters,” reports InvestorPlace. “CDL’s strategy is effective as the ETF had a standard deviation of just 8% at the end of 2017, which is below the comparable metric on the S&P 500. Additionally, CDL’s underlying index has outpaced the S&P 500 by 170 basis points since the index was launched in July 2015.”