Scalper1 News
The Fed is poised to hike the benchmark interest rate in two weeks after almost a decade, oil prices are hitting fresh lows on supply glut and overvaluation concerns over the U.S. market are doing the rounds. Together, these aren’t creating the best backdrop to invest in the equity markets. Moreover, the slowdown in China and the eurozone, the recession in several emerging markets and a technical recession in the Japanese economy continue to cast a shadow over global growth. Plus, broader commodities are slouching, putting mining companies at risk. The sought-after investment broker Goldman Sachs expects weakness in the market next year, with the S&P 500 predicted to close out 2016 at 2,100. The U.S. index presently trades at 2,088, implying almost no change in gains in the coming 13 months. Among the top ETFs, investors have seen the S&P 500-based fund SPY adding about 1.4% and the Dow-based fund DIA losing about 0.3%. Only the tech-laden Nasdaq-based fund QQQ has advanced 11% so far this year (as of December 7, 2015). Higher interest rates post lift-off will result in a stronger greenback, which, in turn, curtailed the profit outlook of the companies. In Q3, earnings from the S&P 500 were down 2.4%, while revenues declined 3.9%. As per Zacks Earnings Trends , earnings for Q4 are projected to be down 6.5% on 3.4% lower revenues. Though the majority of the Fed’s lift-off move is priced in at the current level and the investing world is expecting a slow and small rate hike trajectory, as the U.S. economy is yet to attain the central bank’s inflation goal, a certain level of initial shocks are inevitable once the step is taken. This might lead many investors to seek refuge in low-risk products rather than sticking to highly volatile options and enduring the economic data and Fed-infused storm. In such a scenario, the low-volatility products could be intriguing choices for those who want to stay invested in domestic equities, but like the idea of focusing on minimum volatility. Low-volatility ETFs generally tend to offer positive risk-adjusted gains, though not huge. Investors should note that in down years like 2015, low-volatility products outperform the traditional benchmark. Over the long term as well, low-risk products are seen to surpass the high-risk securities. Below, we highlight five low-volatility ETFs and offer the key features of each so that you can find out which of them is best suited to look after your portfolio . PowerShares S&P 500 Low Volatility Portfolio ETF (NYSEARCA: SPLV ) This $67.1 million low-volatility ETF consists of the 100 stocks from the S&P 500 Index with the lowest realized volatility over the last one year. The fund is heavy on Financials (28.2%), followed by Consumer Staples (21.3%), Industrials (16.7%) and Healthcare (12.4%). It charges 25 bps in fees. SPLV is up over 2.2% so far this year (as of December 7, 2015), and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. PowerShares S&P MidCap Low Volatility ETF (NYSEARCA: XMLV ) This overlooked ETF looks to follow the S&P MidCap 400 Low Volatility Index. The product invests about $118.4 million in assets in 80 stocks. From a sector look, Financials make up half of the portfolio, followed by about 11.26% of assets invested in Industrials and 10.54% in Utilities. The portfolio has minimal company-specific concentration risk, with no company accounting for more than 1.71%. The product charges about 25 bps in fees. It is up 5.4% so far this year. iShares MSCI USA Minimum Volatility ETF (NYSEARCA: USMV ) USMV measures the performance of equity securities in the top 85% by market capitalization of U.S. equities that have lower absolute volatility. It has garnered an asset base of $6.85 billion. This fund is home to 171 securities in total, and assigns double-digit allocation to the Financials (21.2%), Healthcare (19.6%), Information Technology (15.71%) and Consumer Staples (14.43%) sectors. The product also has an edge over its peers when it comes to expenses, as it charges a fee of just 15 basis points annually, while it yields about 1.89%. It has delivered a return of over 4% so far this year. PowerShares S&P 500 ex-Rate Sensitive Low Volatility Portfolio ETF (NYSEARCA: XRLV ) This ETF has already amassed over $113 million in assets. It offers investors dual benefits. First, it is targeted at low-risk stocks, and second, it is insulated from the impending Fed rate hike, as it considers stocks which are less rate-sensitive. Holding 100 stocks in its basket, the fund dose not put more than 1.29% of the total in a single security. It is heavy on Financials (28.2%) and Industrials (21.5%). It charges 25 bps in fees. This product has returned 3.2% in the year-to-date frame (as of December 7, 2015). SPDR Russell 1000 Low Volatility Focus ETF (NYSEARCA: ONEV ) This brand-new ETF gives exposure to low-volatility investing in large cap equity securities. The 424-stock fund is heavy on Financial Services (20.2%), trailed by Consumer Discretionary (16.62%), Producer Durables (15.98%) and Consumer Staples (12.2%). It charges 20 bps in fees. Original Post Scalper1 News
Scalper1 News