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Walmart Inc. (WMT) - free report >>
Berkshire Hathaway Inc. (BRK.B) - free report >>
iShares MSCI USA Min Vol Factor ETF (USMV) - free report >>
Invesco S&P 500 Low Volatility ETF (SPLV) - free report >>
SPDR SSgA US Large Cap Low Volatility Index ETF (LGLV) - free report >>
Ride Out the Market Storm with Low-Volatility ETF Strategies
Stocks have been on a roller coaster ride lately as investors struggle to decipher the impact of President Trump’s tariffs. The S&P 500 has dropped significantly since reaching an all-time high in February, while the CBOE Volatility Index, commonly known as the “fear index,” has surged.
Some recent economic reports have raised fears of stagflation—a scenario where growth slows while inflation remains elevated. Additionally, elevated mega-cap valuations have unnerved investors.
Low- and minimum-volatility investing aims to deliver returns comparable to broader indexes over the long term while minimizing wild swings. These stocks tend to perform better during sharp market downturns but may underperform during strong market rallies.
Low-volatility ETFs have higher allocations to defensive sectors and lower allocations to high-flying technology stocks compared to the broader market.
As a result, they have underperformed the S&P 500 index over the long term. However, these strategies declined much less than the broader index during the 2022 stock market meltdown.
The iShares Edge MSCI Min Vol U.S.A. ETF ((USMV - Free Report) )—the most popular fund in the space—selects and weights stocks to create a portfolio with lower volatility relative to the broader market. The strategy uses optimization, considering both the correlation between stocks and their individual volatility.
The Invesco S&P 500 Low Volatility ETF ((SPLV - Free Report) ) holds the 100 least volatile stocks in the S&P 500 index. The SPDR SSGA U.S. Large Cap Low Volatility Index ETF ((LGLV - Free Report) ) selects the least volatile stocks from the broader Russell 1000 Index.
Berkshire Hathaway ((BRK.B - Free Report) ) and Walmart ((WMT - Free Report) ) are among the top holdings in these ETFs. To learn more, please watch the short video above.