An ETF for the Volatility-Averse Investor
Another way to go is something called the PowerShares S&P 500 Low Volatility ETF (NYSEARCA:SPLV). For low-risk investors who can’t stomach big moves in their stocks, this ETF is for you. The idea here is that the fund will take the S&P 500 and then select the 100 stocks that have the lowest volatility over the preceding 12 months.
By volatility, the fund refers to stocks whose magnitude of price movements are the lowest. This strategy has proven to be very successful, by capturing 73% of the S&P 500’s up movements over time, while only succumbing to 43% of the downside. It’s the very definition of safety. The fund is concentrated mostly in financials and consumer staples, and has many familiar names.
This article is brought to you courtesy of Lawrence Meyers from Wyatt Investment Research.