Low Volatility ETF Showdown – SPLV, USMV, EEMV

| November 14, 2013

showdownIn today’s ETF showdown, we’re taking a look at low volatility ETFs.

Investors have been plowing a boat load of money into ETFs that portray themselves as low volatility ETFs lately.  So far this year, the seven largest low volatility ETFs have raked in a combined $4.5 billion. 

As you know, ETF providers like iShares, State Street, ProShares, and many others offer ETFs that sound similar.  But just because they have a similar name, doesn’t mean they’ll have the same performance.

When your hard-earned money is on the line, selecting the right ETF is crucial to maximizing your profits and minimizing your losses. 

Let’s take a look at three popular Low Volatility ETFs… 

PowerShares S&P 500 Low Volatility Portfolio (SPLV) is the largest of all low volatility funds.  Since it was introduced in May of 2011, it has accumulated $3.9 billion in assets.

At a recent price of $32.61, SPLV is up 20% year-to-date.  It has a dividend yield of 2.76%.  And the expense ratio is a mere 0.25%.

SPLV consists of the 100 stocks from the S&P 500 Index with the lowest realized volatility over the past 12 months.  In other words, it selects stocks that haven’t gone up or down much in the last year.

It is heavily weight toward stocks in the utilites and consumer staples sectors – nearly 45% of the fund’s holdings are concentrated in these two sectors.

iShares MSCI USA Minimum Volatility ETF (USMV) has been one of the most popular low volatility ETFs this year.  It has seen net inflows of $1.2 billion year-to-date.

At a recent price of $34.90, USMV is up 20% this year.  It has a dividend yield of 2.24%.  And a small expense ratio of just 0.15%. 

USMV currently holds 133 stocks.  These stocks are deemed to have lower volatility characteristics than the overall US stock market and be in the top 85% largest stocks by market capitalization.

This stock selection methodology results in very different sector weightings than SPLV.  The top sector weightings for USMV are Health Care with 18.7%, Consumer Staples with 15.3%, and Financials with 15.0%.

Needless to say, the portfolio construction of the two largest US Stock low volatility ETFs are very different.

iShares MSCI Emerging Markets Minimum Volatility ETF (EEMV) is a low volatility play on emerging market stocks.  It has been the most popular of all low volatility ETFs this year.  It has seen net inflows of $1.8 billion year-to-date.   

EEMV is down 5% this year to $57.55.  It has a dividend yield of 1.67% and an expense ratio 0.25%.

This ETF currently holds 218 stocks from outside the US.  The countries with the largest concentration of holdings are Taiwan, China, and South Korea with 17.7%, 13.8%, and 10.7% respectively.

It’s also heavily weighted toward financial stocks with 27% of the holdings coming from this sector.

It’s interesting to note EEMV’s 5% year-to-date loss is outperforming the iShares MSCI Emerging Markets ETF (EEM) that’s down 10% over the same time.  So this ETF appears to be living up to its low volatility name.

Here’s the bottom line…

Low volatility ETFs have gained popularity due to recent studies that show that stocks that don’t have large price fluctuations tend to have better performance over the long run. 

Needless to say, this style of investing appeals to those who prefer a buy and forget system.  And while I don’t believe in buy and hold strategies, low volatility ETFs can play an important piece in your long term investment strategy.  

Good Investing,

Corey Williams

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Category: ETFs, Investment Style ETFs

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets three times a week. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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