The past few days have been choppy for the global financial
market. Investors are dumping high growth and high beta stocks
across the globe thanks to valuation concerns, profit-taking
activity and some sluggish global economic indicators (read:
The Momentum Stock Crash Puts These ETFs in
Hefty valuations are compelling investors to move from highflying
securities, which have shown incredible performance last year, into
larger, more-mature companies that pay dividends and act as a hedge
against economic uncertainty. Concerns over rising interest rates
sooner than expected, slowdown in China and renewed tensions in
Ukraine continued to weigh on global growth and the stock market
despite the gradually improving U.S. economy.
Further, gloomy expectations for Q1 earnings raised concerns on the
stock market rally in the near term. As per the
Zacks Earnings Trends
, earnings as a whole for the S&P 500 are expected to be down
2.6% from the year-ago quarter on 1.0% higher revenues and modestly
Earnings estimates have fallen sharply over the past three months
from 2.1% growth projected in January. The weakness is broad-based
with 10 of the 16 Zacks sectors expected to show earnings decline.
Among the major sectors, finance, technology, energy, medical and
basic materials will likely be the culprits (read:
3 ETFs Tumble Most on Biotech Sell-off
Given sluggish macro fundamentals and apprehension of a weak
earnings season, markets are expected to remain volatile in the
coming days and investors should consider low risk products in
order to protect themselves from huge losses.
Below, we have highlighted three ETFs that investors could consider
in their portfolios if the stock market continues to experience
volatility. These funds appear to be safe in the current market
turbulence, and tend to reduce risk while generating decent
PowerShares S&P 500 Low Volatility Portfolio (
This ETF provides exposure to 100 U.S. stocks with the lowest
realized volatility over the past 12 months by tracking the S&P
500 Low Volatility Index. The fund is widely spread across number
of securities as none of these holds more than 1.24% of assets.
However, the product is tilted toward utilities at nearly 25% share
while consumer staples, financials, industrials and healthcare
round off to the top five (read:
3 Utility ETFs Surviving the Market Turmoil
). SPLV is the largest and the most popular ETF in the low
volatility space with AUM of $3.8 billion and average daily volume
of around 940,000 shares. The fund charges 25 bps in annual fees
and was up about 1% in the past 10 days.
iShares MSCI All Country World Minimum Volatility ETF (
This fund tracks the MSCI All Country World Minimum Volatility
Index. Though the ETF provides exposure to low volatility stocks
across the globe, U.S. accounts for more than half of the asset
base. Apart from this, Japan is the only country with a
double-digit allocation. The product has managed asset base of $1.1
billion while trades in light volume of less than 50,000 shares a
day. Expense ratio came in at 0.20%.
Holding 598 stocks, the fund is widely spread out across each
sector and security. None of the security holds more than 1.56%,
and financials, healthcare, consumer staples and consumer
discretionary occupy the top four positions in terms of sector with
double digit allocations. The ETF added 1.30% over the last 10
PowerShares S&P 500 High Dividend Portfolio (
This fund follows the S&P 500 Low Volatility High Dividend
Index, which includes U.S. stocks that historically provided high
dividend yields and low volatility. The ETF holds 50 stocks in its
basket and each security holds less than 3.11% of assets (see:
all large cap ETFs here
Here, utilities takes the top spot from a sector look with over 26%
share, followed by consumer staples (19%) and financials (15.1%).
The product has amassed $145.8 million in its asset base while
volume is also light. It charges 30 bps in annual fees from
investors. SPHD gained over 2% in the last 10 trading sessions and
has an attractive dividend yield of 3.47%.
These products are clearly outpacing the broad market fund (
) by wide margins, suggesting their potential to outperform in the
coming days as well. This will be especially true if investors'
concerns about valuation deepen and earnings disappoint in first
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ISHARS-MS ACW (ACWV): ETF Research Reports
PWRSH-SP5 HI DV (SPHD): ETF Research Reports
POWERSH-SP5 LVP (SPLV): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
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