Safe-haven assets like gold and bonds are typical go-to strategies when the markets are fluxing up and down with rollercoaster-like volatility, but one option to consider is low-volatility exchange-traded funds (ETFs). On an episode of “ETF Edge,” Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA, suggested the use of these funds to help lessen the blow of any sharp market downturns the major indexes have been seeing as of late.
A pair of funds to look at are the iShares Edge MSCI Minimum Volatility USA ETF (USMV) and Invesco S&P 500 Low Volatility ETF (SPLV). Not only do the funds help shield volatility, but they also do so at a low cost—a 0.15% expense ratio for USMV and a 0.25% expense ratio for SPLV.
On one hand, there’s USMV, which seeks the investment results of the MSCI USA Minimum Volatility (USD) Index. The index measures the performance of large and mid-capitalization equity securities listed on stock exchanges in the U.S. that, in the aggregate, have lower volatility relative to the large- and mid-cap U.S. equity market.
As for SPLV, it seeks to track the investment results of the S&P 500 Low Volatility Index. Strictly in accordance with its guidelines and mandated procedures, the index provider selects 100 securities from the S&P 500 Index for inclusion in the underlying index that have the lowest realized volatility over the past 12 months as determined by S&P DJI.
“SPLV and USMV are two of the flagship products that are out there from Invesco and iShares, and they’re more defensive, so you’ll have heavier weightings in those more stable sectors,” Rosenbluth said. “You’ll still have some exposure to some of the more cyclical ones, so, you can be in the market, as Dave mentioned earlier, but protect more of the downside as opposed to shifting to fixed income.”
Another fund to consider is the iShares Edge MSCI Min Vol EAFE ETF (BATS: EFAV). EFAV seeks the investment results of the MSCI EAFE Minimum Volatility (USD) Index composed of developed market equities that, in the aggregate, have lower volatility characteristics relative to the broader developed equity markets, excluding the U.S. and Canada. The index measures the performance of international equity securities that in the aggregate have lower volatility relative to the MSCI EAFE Index.
A couple other ETFs to consider:
- iShares Edge MSCI EM Minimum Volatility UCITS ETF (BATS: EEMV)
- Invesco S&P MidCap Low Volatility ETF (NYSEArca: XMLV)
For more market trends, visit ETF Trends.