Four Low Volatility ETFs Your Broker Forgot to Mention
Day traders aside, there are plenty of folks out there that do not enjoy market volatility. Unfortunately, regardless of what culprit one chooses to blame, market volatility is probably here to stay.
Adding to the difficulty in navigating a volatile market environment are elevated correlations. That means almost everywhere investors turn, they're going to be exposed to unwanted fluctuations and gyrations.
The good news is there is a new breed of ETFs specializing in the low volatility concept and most them probably haven't been part of a conversation between you and your broker.
PowerShares S&P 500 Low Volatility Portfolio (NYSE: SPLV): Home to 100 stocks and a nice 0.25% expense ratio, SPLV made its debut in early May and is provign to be one of 2011's best new ETFs, particularly from the assets under management standpoint as the ETF has raked on $432.3 million in AUM. SPLV focuses on the 100 members of the S&P 500 that have displayed the lowest volatility over the past 12 months.
Not surprisingly, that means utilities and consumer staples comprise over 55% of the ETF's weight. No stock gets a weight of more than 1.56% and top-10 holdings include standard low beta fare such as Procter & Gamble (NYSE: PG), Kimberly-Clark (NYSE: KMB), Wal-Mart (NYSE: WMT) and Southern Company (NYSE: SO).
EGShares Emerging Markets High Income/Low Beta ETF (NYSE: HILO): HILO is another new ETF that is offer to a banner start. After an early August debut, the 29-stock ETF has over $14.5 million in AUM. HILO's objective is to provider greater income with less volatility than emerging markets ETFs that track the MSCI Emerging Markets Index. Five countries – South Africa, China, Thailand, Brazil and Malaysia – get double-digit allocations while telecom and utilities are the dominant sector weights.
Russell 2000 Low Beta ETF (NYSE: SLBT); Yet another new fund, the Russell 2000 Low Beta ETF debuted in late May and now has almost $4.5 million in AUM. Home to 372 stocks, SLBT is designed to give investors exposure to the lowest beta members of the Russell 2000 Index. As such, SLBT's beta against the Russell 3000 is just 0.87.
Health care names account for over 30% of SLBT's weight and oddly enough, financials get an allocation of over 22%. Staples and utilities combine for another 28%.
Russell 1000 Low Volatility ETF (NYSE: LVOL): Like SLBT, LVOL made its debut in late May and has flourished, attracting almost $28 million in AUM in that time. LVOL features an even lower beta versus the Russell 3000 at 0.79. Home to 111 stocks, LVOL has a decent yield of 3%. Five sectors – utilities, staples, health care, producer durables and technology – receive double-digit allocations and energy isn't far behind at 9.8%.
The top-10 holdings, which include three Dow stocks, account for 20.77% of LVOL's weight. LVOL has an expense ratio of 0.49%, lower than SLBT's fees of 0.69%.
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