From Zacks: Volatility is ruling the market for some time now. Rising rate concerns in the United States have spooked the broader market. Overvaluation, U.S.-Sino trade tensions and the resultant pressure on global growth, geopolitical issues and uncertainty around mid-terms are added worries.
While the entire October has been tumultuous, Oct 24 saw a severe selloff with the S&P, Dow Jones and the Nasdaq Composite losing a respective 3.1%, 2.4% and 4.4%. The S&P 500 and the Dow Jones are now in the red for the year and the Nasdaq has slipped into the correction territory. CBOE Volatility Index , widely viewed as the best gauge of fear in the market, rose 21.8%. The index is up 103% in the past month (as of Oct 24, 2018) (read: October Traditionally Most Volatile: ETFs That Gained).
Big three U.S. ETFs — SPDR S&P 500 ETF (SPY – Free Report) , SPDR Dow Jones Industrial Average ETF (DIA – Free Report) and Invesco QQQ Trust (QQQ – Free Report) — lost about 9.1%, 7.9% and 11.2% this month (as of Oct 24, 2018). Meanwhile, all-world ETF iShares MSCI ACWI ETF (ACWI – Free Report) shed about 9.5%. For the year, the S&P 500 and the Dow Jones are down 1.5% and 0.1%.
Morgan Stanley apprehends more selling pressure on Wall Street due to “declining liquidity and growing concerns about peaking growth”. Very few areas are in the green at the moment.
These Low Risk ETFs Could be Useful
Against this backdrop, we highlight a few low-risk ETFs to soothe investors’ nerves.
The actively managed fund uses a host of strategies to offer capital appreciation while lowering risk quotient across market conditions. “The fund invests in high-quality companies across all industries and sectors, that have prospects for long-term total returns as a result of their ability to grow earnings and their willingness to increase dividends over time,” per the factsheet. The fund also buys index put options that can guard it against any market crash. The fund has added more than 0.7% on Oct 24 and 1.3% in the past month.
This fund also tracks the performance of U.S. small capitalization companies that exhibit low volatility. The fund is heavy on Financial Services (30.64%) followed by Real Estate (15.88%). It was up 0.6% on Oct 24. Meanwhile, it has lost 9% in the past month, in line with the S&P 500.
The underlying index comprises small-cap stocks with lower volatility characteristics relative to the small-capitalization U.S. equity market. Real Estate (15.28%), Financials (15.13%), Health Care (14.49%), Consumer Discretionary (10.48%) and Information Technology (10.00%) are the top five sectors. It was down about 1.9% on Oct 24 but lost (down 6.2%) lesser than the S&P 500.
The fund looks to achieve its investment objective by investing at least 80% of its net assets in common stocks of domestic companies listed and traded on U.S. national securities exchanges. The fund was off 1.2% on Oct 24 and lost only 5.3% in the past month.
The iShares Edge MSCI Min Vol USA ETF (USMV) was unchanged in premarket trading Friday. Year-to-date, USMV has gained 3.78%, versus a 1.61% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of Zacks Research.