ETFs
Prepare with these ETFs as volatility rises
One of the certainties in any market is that volatility will always strike. As the S&P 500 Index follows an upward trend, investors can rely on two exchange-traded funds (ETFs) from Invesco that provide strategic, low-volatility exposure to the S&P 500.
Rate cuts are expected to come late this year or early next year. Markets are particularly vulnerable to the interest rate guidance of the US Federal Reserve. Additionally, earnings reports can always be a catalyst for volatility. That said, investors appear willing to accept the risk associated with market fluctuations.
“Stock investors are bracing for a spike in market volatility, and upcoming events such as Nvidia Corp.’s earnings report may exacerbate any moves, according to Goldman Sachs Group Inc. strategists.” Bloomberg reported. “The bank’s risk appetite measure last week reached its highest level since 2021, driven by optimism around economic growth and monetary policy, but momentum has slowed.”
When volatility hits, it’s ideal to have the Invesco S&P 500 Low Volatility ETF (SPLV A+) as part of a portfolio. It can serve as a complement to current S&P 500 exposure with a broad-based fund or simply on its own for more risk-averse investors.
According to its base fund description, SPLV tracks the S&P 500® Low Volatility Index. The index is compiled, maintained and calculated by Standard and Poor’s and consists of the 100 stocks in the S&P 500 index with the lowest realized volatility over the past 12 months.
The relatively stable composition of large and mid-caps means that the fund protects investors from sudden market movements. This is especially important when things tend to go down during a selloff. However, when there is upside potential, investors can capture those gains and get a tinge of growth from this mid-cap component.
Fixed-income investors looking for a low-volatility option that earns income from S&P 500 companies will want to look at the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD C+). To achieve its return, SPHD invests primarily in large-cap growth and mid-cap value companies, thereby mitigating credit risk.
According to its fund description, SPHD seeks to track the investment results (before fees and expenses) of the S&P 500® Low Volatility High Dividend Index. The index provider compiles, maintains and calculates the underlying index, which is comprised of 50 S&P 500® Index securities that have historically provided high dividend yields with lower volatility. To gain exposure to SPHD, ETF investors are looking at a net expense ratio of 0.30%.
With a 30-day SEC yield of 4.46%, this provides investors with a complementary component to an existing bond portfolio. Or, a standalone bond product. At this rating, SPHD had a 30-day SEC yield of 4.46% as of May 22.
For more news, information and analysis, visit Innovative ETF Channel.