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.
Volatility is set to rise further as we enter into a new month. This is especially true as the tensions between Moscow and the West over Ukraine, higher inflation and the Fed rate hike bets continued to keep investors on edge.
In such a scenario, investors should apply some hedging techniques to their equity portfolio. While there are a number of ways to do this, volatility-hedged ETFs like Amplify BlackSwan Growth & Treasury Core ETF (SWAN - Free Report) , Invesco S&P 500 Downside Hedged ETF (PHDG - Free Report) , Aptus Drawdown Managed Equity ETF (ADME - Free Report) , DeltaShares S&P 500 Managed Risk ETF (DMRL) and Nationwide Risk-Based U.S. Equity ETF could prove beneficial amid market uncertainty. Investors should note that these funds have the potential to stand out and outperform the simple vanilla funds in case of rising volatility.
Volatility Lingers
The geopolitical tension has been the hot issue right now, and investors are closely watching the implications on the global economy. Western countries slapped fresh sanctions on Russia for invading Ukraine, and president Vladimir Putin put his country's nuclear deterrent on high alert. Western nations like the United States, Britain, Europe and Canada have blocked some Russian banks from the SWIFT international payments system. New measures also include restrictions on the Russian central bank's international reserves. The sanctions will be implemented in the coming days.
Meanwhile, the Fed is planning to raise interest rates for the first time since 2018 to combat the 40-year high inflation. Experts believe that the Fed will likely increase interest rates at all seven of its meetings this year, bringing the interest rate to one of its highest levels since 2018.
Amplify BlackSwan Growth & Treasury Core ETF tracks the S-Network BlackSwan Core Index, which seeks uncapped exposure to the S&P 500, while buffering against the possibility of significant losses. Approximately 90% of the ETF will be invested in U.S. Treasury securities, while around 10% will be invested in SPY LEAP Options in the form of in-the-money calls.
Amplify BlackSwan Growth & Treasury Core ETF has amassed $702.1 million and trades in an average daily volume of 274,000 shares. It charges 49 basis points (bps) in annual fees.
Invesco S&P 500 Downside Hedged ETF is an actively managed fund and seeks to deliver positive returns in rising or falling markets that are not directly correlated to broad equity or fixed-income market returns. Invesco S&P 500 Downside Hedged ETF tries to follow the S&P 500 Dynamic VEQTOR Index, which provides broad equity market exposure with an implied volatility hedge by dynamically allocating between different asset classes: equity, volatility and cash. The index allows investors to receive exposure to the equity and volatility of the S&P 500 Index in a dynamic framework (read: 5 Long/Short ETFs to Defend Your Portfolio Against Volatility).
Invesco S&P 500 Downside Hedged ETF has accumulated $386.1 million in its asset base and charges 40 bps in fees per year from its investors. Volume is good, exchanging 133,000 shares a day on average.
Aptus Drawdown Managed Equity ETF seeks capital appreciation with a focus on managing drawdown risk through hedges. The strategy typically selects 50-75 large U.S. companies based on a Yield plus Growth framework, tilting holdings to favor companies with solid fundamentals and reasonable valuations while avoiding those with negative price momentum. It has an added objective of capital protection through the use of equity and index options to reduce drawdown when U.S. equity markets are falling.
Aptus Drawdown Managed Equity ETF charges 79 bps in annual fees and has accumulated $360.4 million in its asset base. It trades in an average daily volume of 57,000 shares.
DeltaShares S&P 500 Managed Risk ETF (DMRL)
DeltaShares S&P 500 Managed Risk ETF seeks to track the S&P 500 Managed Risk 2.0 Index, which is designed to simulate a downside-protected portfolio by utilizing a framework that includes targeted volatility and a synthetic option overlay to hedge the downside risk of the portfolio.
DeltaShares S&P 500 Managed Risk ETF has accumulated nearly $328 million in its asset base and trades in light volume of 2,000 shares. It charges 35 bps in fees per year.
Nationwide Risk-Based U.S. Equity ETF
Nationwide Risk-Based U.S. Equity ETF follows the Rothschild & Co Risk-Based US Index and employs a risk-based strategy that seeks to provide upside potential while protecting against losses stemming from volatility. It holds well-diversified 252 stocks in its basket, with none of the securities accounting for more than a 1.1% share. Healthcare, consumer defense, industrials and consumer cyclical are the top four sectors (read: 5 Sector ETFs That Gained Double-Digits in Wild February).
Nationwide Risk-Based U.S. Equity ETF has accumulated $114.6 million and charges 30 bps in annual fees. It trades in a moderate volume of 3,000 shares a day on average.
Bottom Line
Investors can definitely shield their portfolios against volatility with the help of the above-mentioned products. These provide dynamic exposure according to the level of market volatility and are least affected by any market turmoil. So, they could prove to be great choices when it comes to offering protection against market downturns.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
How to Play Volatility With ETFs
Volatility is set to rise further as we enter into a new month. This is especially true as the tensions between Moscow and the West over Ukraine, higher inflation and the Fed rate hike bets continued to keep investors on edge.
In such a scenario, investors should apply some hedging techniques to their equity portfolio. While there are a number of ways to do this, volatility-hedged ETFs like Amplify BlackSwan Growth & Treasury Core ETF (SWAN - Free Report) , Invesco S&P 500 Downside Hedged ETF (PHDG - Free Report) , Aptus Drawdown Managed Equity ETF (ADME - Free Report) , DeltaShares S&P 500 Managed Risk ETF (DMRL) and Nationwide Risk-Based U.S. Equity ETF could prove beneficial amid market uncertainty. Investors should note that these funds have the potential to stand out and outperform the simple vanilla funds in case of rising volatility.
Volatility Lingers
The geopolitical tension has been the hot issue right now, and investors are closely watching the implications on the global economy. Western countries slapped fresh sanctions on Russia for invading Ukraine, and president Vladimir Putin put his country's nuclear deterrent on high alert. Western nations like the United States, Britain, Europe and Canada have blocked some Russian banks from the SWIFT international payments system. New measures also include restrictions on the Russian central bank's international reserves. The sanctions will be implemented in the coming days.
European nations and Canada shut down their airspace to Russian aircraft, an unprecedented step aimed at putting pressure on Putin to end his invasion of Ukraine (read: 5 ETFs to Tackle Ukraine-Russia War, Inflation & Fed Rate Hike Woes).
Meanwhile, the Fed is planning to raise interest rates for the first time since 2018 to combat the 40-year high inflation. Experts believe that the Fed will likely increase interest rates at all seven of its meetings this year, bringing the interest rate to one of its highest levels since 2018.
How to Play
Amplify BlackSwan Growth & Treasury Core ETF (SWAN - Free Report)
Amplify BlackSwan Growth & Treasury Core ETF tracks the S-Network BlackSwan Core Index, which seeks uncapped exposure to the S&P 500, while buffering against the possibility of significant losses. Approximately 90% of the ETF will be invested in U.S. Treasury securities, while around 10% will be invested in SPY LEAP Options in the form of in-the-money calls.
Amplify BlackSwan Growth & Treasury Core ETF has amassed $702.1 million and trades in an average daily volume of 274,000 shares. It charges 49 basis points (bps) in annual fees.
Invesco S&P 500 Downside Hedged ETF (PHDG - Free Report)
Invesco S&P 500 Downside Hedged ETF is an actively managed fund and seeks to deliver positive returns in rising or falling markets that are not directly correlated to broad equity or fixed-income market returns. Invesco S&P 500 Downside Hedged ETF tries to follow the S&P 500 Dynamic VEQTOR Index, which provides broad equity market exposure with an implied volatility hedge by dynamically allocating between different asset classes: equity, volatility and cash. The index allows investors to receive exposure to the equity and volatility of the S&P 500 Index in a dynamic framework (read: 5 Long/Short ETFs to Defend Your Portfolio Against Volatility).
Invesco S&P 500 Downside Hedged ETF has accumulated $386.1 million in its asset base and charges 40 bps in fees per year from its investors. Volume is good, exchanging 133,000 shares a day on average.
Aptus Drawdown Managed Equity ETF (ADME - Free Report)
Aptus Drawdown Managed Equity ETF seeks capital appreciation with a focus on managing drawdown risk through hedges. The strategy typically selects 50-75 large U.S. companies based on a Yield plus Growth framework, tilting holdings to favor companies with solid fundamentals and reasonable valuations while avoiding those with negative price momentum. It has an added objective of capital protection through the use of equity and index options to reduce drawdown when U.S. equity markets are falling.
Aptus Drawdown Managed Equity ETF charges 79 bps in annual fees and has accumulated $360.4 million in its asset base. It trades in an average daily volume of 57,000 shares.
DeltaShares S&P 500 Managed Risk ETF (DMRL)
DeltaShares S&P 500 Managed Risk ETF seeks to track the S&P 500 Managed Risk 2.0 Index, which is designed to simulate a downside-protected portfolio by utilizing a framework that includes targeted volatility and a synthetic option overlay to hedge the downside risk of the portfolio.
DeltaShares S&P 500 Managed Risk ETF has accumulated nearly $328 million in its asset base and trades in light volume of 2,000 shares. It charges 35 bps in fees per year.
Nationwide Risk-Based U.S. Equity ETF
Nationwide Risk-Based U.S. Equity ETF follows the Rothschild & Co Risk-Based US Index and employs a risk-based strategy that seeks to provide upside potential while protecting against losses stemming from volatility. It holds well-diversified 252 stocks in its basket, with none of the securities accounting for more than a 1.1% share. Healthcare, consumer defense, industrials and consumer cyclical are the top four sectors (read: 5 Sector ETFs That Gained Double-Digits in Wild February).
Nationwide Risk-Based U.S. Equity ETF has accumulated $114.6 million and charges 30 bps in annual fees. It trades in a moderate volume of 3,000 shares a day on average.
Bottom Line
Investors can definitely shield their portfolios against volatility with the help of the above-mentioned products. These provide dynamic exposure according to the level of market volatility and are least affected by any market turmoil. So, they could prove to be great choices when it comes to offering protection against market downturns.