Getting Paid to Skirt Volatile Stocks

As the smart beta boom takes flight, a popular concept has been to combine investment factors or strategies under the umbrella of one exchange traded fund. An example of this theme is the combination of dividends and the low volatility factor in one ETF.

One ETF that pledges payouts and a roster chock full of low volatility stocks is the Legg Mason Low-Volatility High-Dividend ETF (NASDAQ: LVHD). LVHD debuted in late 2015 and is one of three dividend/low volatility ETFs from Legg Mason.

LVHD’s portfolio “is constructed of the highest scoring securities subject to concentration limits: no individual component of the Index will exceed 2.5%, no individual sector (as defined by QS) will exceed 25%, and real estate investment trust (“REIT”) components as a whole will not exceed 15%. The number of component securities in the Index is anticipated to range from 50 to 100,” according to Legg Mason.

LVHD’s international counterparts are the Legg Mason Emerging Markets Low Volatility High Dividend ETF (BATS: LVHE) and the Legg Mason International Low Volatility High Dividend ETF (BATS: LVHI). Both LVHI and LVHE employ currency hedging in attempts to further mitigate risk which may help during times of extreme market disruption.