We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Low-volatility ETFs are in vogue on rising market volatility and uncertainty. Escalating worries about a potential Russian invasion of Ukraine coupled with the Fed rate hike plan and skyrocketing inflation are making investors jittery.
We present five ETFs — iShares MSCI USA Min Vol Factor ETF (USMV - Free Report) , Invesco S&P 500 Low Volatility ETF (SPLV - Free Report) , Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report) , Invesco S&P MidCap Low Volatility ETF (XMLV - Free Report) and Invesco S&P SmallCap Low Volatility ETF (XSLV - Free Report) — that could be solid options for investors amid the current market volatility. These are popular and liquid options in the low-volatility space.
Macro Trends
The rise in tensions between Washington and Russia over Ukraine has resulted in a sharp sell-off in the stock market. The Dow Jones logged in its biggest daily decline since the end of November while the S&P 500 broke a two-day winning streak, falling more than 2%. The Nasdaq Composite declined 2.9%.
The geopolitical issue accelerated after Ukraine accused pro-Russian separatists of attacking a village near the border. Meanwhile, U.S. Secretary of State Antony Blinken, speaking at the United Nations, made an urgent appeal against an invasion.
Additionally, the Fed is planning to raise rates for the first time in more than three years to combat the skyrocketing inflation. The consumer price index jumped 7.5% year over year in January, marking the biggest 12-month gain since February 1982. The high inflation has set the stage for the first interest rate hike as soon as March. Wall Street analysts are predicting as many as seven rate hikes this year (read: U.S. Inflation at a 40-Year High: 4 Sector ETFs to Win).
Further, rounds of weak economic data added to the chaos. U.S. consumer sentiment fell to its lowest level in more than a decade in early February, per the University of Michigan Consumer Sentiment Index, amid expectations that inflation would continue to increase in the near term. Meanwhile, manufacturing growth slowed down for the third straight month in January amid a surge in coronavirus cases and an increase in materials costs.
However, the economy has been growing on the wider spread of vaccinations and easing stay-at-home restrictions. The economy expanded 5.7% annually in 2021, marking the fastest pace of growth since 1984 and a sharp reversal from the GDP contraction of 3.4% recorded in 2020. Additionally, retail sales increased the most in 10 months in January to a record high driven by a surge in purchases of motor vehicles and other goods.
Why Low-Volatility ETFs?
Low-volatility ETFs have the potential to outpace the broader market in an uncertain environment providing significant protection to the portfolio. This is because these funds include more stable stocks that have experienced the least price movement in their portfolio. Further, these allocate more to defensive sectors with a higher distribution yield than the broader markets.
Given these characteristics, these products are in the limelight. We have highlighted the above-mentioned ETFs in detail below:
iShares MSCI USA Min Vol Factor ETF offers exposure to the stocks that have historically declined less than the market during downturns by tracking the MSCI USA Minimum Volatility Index. iShares MSCI USA Min Vol Factor ETF holds 172 stocks in its basket, with none accounting for more than 1.7% of the assets. Information technology takes the top spot at 23.7%, while healthcare, consumer staples and communication round off the next three spots (read: 4 ETFs to Invest in on Rising Market Volatility).
With AUM of $27.7 billion, iShares MSCI USA Min Vol Factor ETF charges 15 basis points (bps) in annual fees and trades in a solid average daily volume of 4.1 million shares. USMV has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Invesco S&P 500 Low Volatility ETF provides exposure to stocks with the lowest realized volatility over the past 12 months. It tracks the S&P 500 Low Volatility Index and holds 101 securities in its basket. Invesco S&P 500 Low Volatility ETF is widely spread across sectors, with consumer staples, utilities, industrials and healthcare receiving double-digit exposure each.
Invesco S&P 500 Low Volatility ETF has amassed $9.1 billion in its asset base and trades in heavy volume of around 6.4 million shares a day on average. It charges 25 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Invesco S&P 500 High Dividend Low Volatility ETF offers exposure to 51 stocks traded on the S&P 500 Index that historically have provided high dividend yields and low volatility. It follows the S&P 500 Low Volatility High Dividend Index. Invesco S&P 500 High Dividend Low Volatility ETF is widely spread across sectors, with consumer staples, utilities, real estate and healthcare receiving double-digit exposure each.
Invesco S&P 500 High Dividend Low Volatility ETF has amassed $3.2 billion and charges 30 bps in annual fees. The fund trades in an average daily volume of 1.4 million shares (read: Guide to Dividend Aristocrat ETFs).
Invesco S&P MidCap Low Volatility ETF offers exposure to the mid-cap securities from the S&P MidCap 400 Index with the lowest-realized volatility over the past 12 months. It follows the S&P MidCap 400 Low Volatility Index and holds 79 securities in its basket. Invesco S&P MidCap Low Volatility ETF is widely spread across sectors, with industrials, real estate, utilities, materials and financials receiving the double-digit exposure each.
Invesco S&P MidCap Low Volatility ETF has AUM of $1.2 billion and charges 25 bps in annual fees. XMLV trades in an average daily volume of about 113,000 shares.
Invesco S&P SmallCap Low Volatility ETF offers exposure to small-cap securities from the S&P SmallCap 600 Index with the lowest realized volatility over the past 12 months. It follows the S&P SmallCap 600 Index and holds 120 stocks in its basket. Invesco S&P SmallCap Low Volatility ETF is also widely spread across sectors with financials, real estate, information technology and industrials, receiving double-digit exposure each.
Invesco S&P SmallCap Low Volatility ETF has amassed $1.1 billion and trades in volume of 133,000 shares per day on average. The product charges 25 bps in annual fees.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
5 Low-Volatility ETFs to Bet on Rising Worries
Low-volatility ETFs are in vogue on rising market volatility and uncertainty. Escalating worries about a potential Russian invasion of Ukraine coupled with the Fed rate hike plan and skyrocketing inflation are making investors jittery.
We present five ETFs — iShares MSCI USA Min Vol Factor ETF (USMV - Free Report) , Invesco S&P 500 Low Volatility ETF (SPLV - Free Report) , Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report) , Invesco S&P MidCap Low Volatility ETF (XMLV - Free Report) and Invesco S&P SmallCap Low Volatility ETF (XSLV - Free Report) — that could be solid options for investors amid the current market volatility. These are popular and liquid options in the low-volatility space.
Macro Trends
The rise in tensions between Washington and Russia over Ukraine has resulted in a sharp sell-off in the stock market. The Dow Jones logged in its biggest daily decline since the end of November while the S&P 500 broke a two-day winning streak, falling more than 2%. The Nasdaq Composite declined 2.9%.
The geopolitical issue accelerated after Ukraine accused pro-Russian separatists of attacking a village near the border. Meanwhile, U.S. Secretary of State Antony Blinken, speaking at the United Nations, made an urgent appeal against an invasion.
Additionally, the Fed is planning to raise rates for the first time in more than three years to combat the skyrocketing inflation. The consumer price index jumped 7.5% year over year in January, marking the biggest 12-month gain since February 1982. The high inflation has set the stage for the first interest rate hike as soon as March. Wall Street analysts are predicting as many as seven rate hikes this year (read: U.S. Inflation at a 40-Year High: 4 Sector ETFs to Win).
Further, rounds of weak economic data added to the chaos. U.S. consumer sentiment fell to its lowest level in more than a decade in early February, per the University of Michigan Consumer Sentiment Index, amid expectations that inflation would continue to increase in the near term. Meanwhile, manufacturing growth slowed down for the third straight month in January amid a surge in coronavirus cases and an increase in materials costs.
However, the economy has been growing on the wider spread of vaccinations and easing stay-at-home restrictions. The economy expanded 5.7% annually in 2021, marking the fastest pace of growth since 1984 and a sharp reversal from the GDP contraction of 3.4% recorded in 2020. Additionally, retail sales increased the most in 10 months in January to a record high driven by a surge in purchases of motor vehicles and other goods.
Why Low-Volatility ETFs?
Low-volatility ETFs have the potential to outpace the broader market in an uncertain environment providing significant protection to the portfolio. This is because these funds include more stable stocks that have experienced the least price movement in their portfolio. Further, these allocate more to defensive sectors with a higher distribution yield than the broader markets.
Given these characteristics, these products are in the limelight. We have highlighted the above-mentioned ETFs in detail below:
iShares MSCI USA Min Vol Factor ETF (USMV - Free Report)
iShares MSCI USA Min Vol Factor ETF offers exposure to the stocks that have historically declined less than the market during downturns by tracking the MSCI USA Minimum Volatility Index. iShares MSCI USA Min Vol Factor ETF holds 172 stocks in its basket, with none accounting for more than 1.7% of the assets. Information technology takes the top spot at 23.7%, while healthcare, consumer staples and communication round off the next three spots (read: 4 ETFs to Invest in on Rising Market Volatility).
With AUM of $27.7 billion, iShares MSCI USA Min Vol Factor ETF charges 15 basis points (bps) in annual fees and trades in a solid average daily volume of 4.1 million shares. USMV has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Invesco S&P 500 Low Volatility ETF (SPLV - Free Report)
Invesco S&P 500 Low Volatility ETF provides exposure to stocks with the lowest realized volatility over the past 12 months. It tracks the S&P 500 Low Volatility Index and holds 101 securities in its basket. Invesco S&P 500 Low Volatility ETF is widely spread across sectors, with consumer staples, utilities, industrials and healthcare receiving double-digit exposure each.
Invesco S&P 500 Low Volatility ETF has amassed $9.1 billion in its asset base and trades in heavy volume of around 6.4 million shares a day on average. It charges 25 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report)
Invesco S&P 500 High Dividend Low Volatility ETF offers exposure to 51 stocks traded on the S&P 500 Index that historically have provided high dividend yields and low volatility. It follows the S&P 500 Low Volatility High Dividend Index. Invesco S&P 500 High Dividend Low Volatility ETF is widely spread across sectors, with consumer staples, utilities, real estate and healthcare receiving double-digit exposure each.
Invesco S&P 500 High Dividend Low Volatility ETF has amassed $3.2 billion and charges 30 bps in annual fees. The fund trades in an average daily volume of 1.4 million shares (read: Guide to Dividend Aristocrat ETFs).
Invesco S&P MidCap Low Volatility ETF (XMLV - Free Report)
Invesco S&P MidCap Low Volatility ETF offers exposure to the mid-cap securities from the S&P MidCap 400 Index with the lowest-realized volatility over the past 12 months. It follows the S&P MidCap 400 Low Volatility Index and holds 79 securities in its basket. Invesco S&P MidCap Low Volatility ETF is widely spread across sectors, with industrials, real estate, utilities, materials and financials receiving the double-digit exposure each.
Invesco S&P MidCap Low Volatility ETF has AUM of $1.2 billion and charges 25 bps in annual fees. XMLV trades in an average daily volume of about 113,000 shares.
Invesco S&P SmallCap Low Volatility ETF (XSLV - Free Report)
Invesco S&P SmallCap Low Volatility ETF offers exposure to small-cap securities from the S&P SmallCap 600 Index with the lowest realized volatility over the past 12 months. It follows the S&P SmallCap 600 Index and holds 120 stocks in its basket. Invesco S&P SmallCap Low Volatility ETF is also widely spread across sectors with financials, real estate, information technology and industrials, receiving double-digit exposure each.
Invesco S&P SmallCap Low Volatility ETF has amassed $1.1 billion and trades in volume of 133,000 shares per day on average. The product charges 25 bps in annual fees.