If 2022 wasn’t part of a global pandemic, markets might look back on it as a peak of volatility for the last decade, perhaps since the Great Recession. As such, investors were on the lookout for the right strategies to manage that volatility this year, with some of the top low-vol ETF stories of 2022 focused not only on low-vol strategies but also one of the year’s standout themes in the form of dividends.
With dividend ETFs seeing significant interest at the end of the year, here are the top three most-read low-vol ETFs of the year.
Put This Low-Vol ETF in Your Core Equity Exposure
Representing a somewhat niche part of the ETF world, low-vol strategies had their moment in the sun this year. One takeaway for investors was that high-quality stocks see much less volatility than their low-quality relatives, which saw readers intrigued by the focus of the most-read piece, the FlexShares US Quality Low Volatility Index Fund (QLV).
The strategy has had some ups and downs this year, returning -10.5% YTD, 2.75% over three months, and -1.9% over one month. The passively-managed strategy holds Microsoft (MSFT) as its largest-weighted holding at 7.2%.
High Dividends, Low Volatility Still a Good Match
The second most-read low-vol ETF story of the year was also published in June, this time focused on the combination of high dividends and low volatility available in the Franklin U.S. Low Volatility High Dividend Index ETF (LVHD). Still named for Franklin Templeton’s affiliate Legg Mason at the time of writing, the piece points to the strategy’s use of defensive sectors like real estate and utilities as well as interesting Casino REITs giving it some broad and durable coverage.
LVHD has added $179 million in net inflows over the last three months and has significantly outperformed its categories with a 2.9% return over that time as well against a 0.58% return for the ETF Database Category Average, for example. The ETF charges a 27-basis point fee, topped off by its 2.6% annual dividend yield.
Get Low-Vol Dividends in ETF Duo LVHD, LVHI
That focus on dividends is borne out in the third most-read story on low vol of the year, in which readers were drawn to the duo of LVHD and its sibling, the Franklin International Low Volatility High Dividend Index ETF (LVHI).
Whereas the second most-read piece arrived in June earlier in the dividend trend, the November piece was able to look back on some of the flows and performance attracting interest in the likes of LVHD and LVHI. The latter ETF has added $91 million in net inflows over the last three months, returning 3.5% on a YTD basis.
Whether domestic or international, investing in dividends could be an intriguing option entering the next year with markets possibly facing a recession and a long period of high rates. For those investors looking to manage volatility, both specific low-vol strategies and dividend ETFs emerge as strong themes from the top low-vol ETF stories of 2022.
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