The Best Low Volatility ETFs 2018

After a few good years of calm markets and reasonable success for a lot of investors, the times of volatility appear to have now returned. There have been massive intra-days swings seen across the board, including with ETFs. Some of these swings are of a similar scale to those which have not really been seen since days of recession. With this increased volatility, investors are worried, especially if they are getting closer to their retirement age and looking to become more risk averse.

  • The best low volatility ETFs
  • 10 low risk ETFs
  • Variety of assets classes
  • Variety of industries
ETF Highlights

What to expect

There are a lot of different exchange traded funds (ETFs) that will help to smooth out the volatility somewhat. While you will be giving up some potential returns, you will also be minimising your risk levels, making these investments more consistent and dependable as opposed to bouncier types of ETFs which have significant volatility. Here are some of those types of low risk ETFs that will help you cut through the volatility.

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Perhaps the leading low risk ETF on the market today when it comes to combatting volatility is the newly renamed iShares Edge MSCI Min Vol USA ETF (USMV). At the moment, it can count as much as $15 billion in terms of assets they have under their control and this is all justified. It is a smart-beta ETF and they utilise many different types of screens in order to filter out those stocks which are showcasing high levels of volatility. This allows them to cement the gains seen with the upside in the market, at the same time as minimising the negative effects of the downside of the market.  Let’s take a closer look at iShares and some of the other leading best low volatility etf’s.

Top 3 ETF Broker Comparison

1
of 14 ETF Broker Placetrade
ETFs w/ discount 0
Custody fee $0
Min. deposit $ 5.000
Trading from $1,50
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Risk warning: Capital can be lost. Terms and conditions apply.
2
of 14 ETF Broker Betterment
ETFs w/ discount 0
Custody fee 0.25%
Min. deposit $ 0
Trading from $0
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Risk warning: Capital can be lost. Terms and conditions apply.
3
of 14 ETF Broker Lightspeed Trading
ETFs w/ discount 0
Custody fee $0
Min. deposit $ 10.000
Trading from $2,50
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.

iShares Edge MSCI Min Vol USA ETF (USMV)

By having a portfolio of stocks that traditionally are of a lower volatility, you are going to see a lot more consistency in the performance of your investment as the high bounces and declines of prices will be smoothed out.

This is something that the USMV ETF has been delivering in recent times. It was first set up back in November 2011 when they successfully matched approximately 80% of the gains seen with the S&P 500 and only 49% of the losses of this market. This means that it had a beta reading of 0.68, meaning that in terms of volatility, it is over a quarter lower than the volatility seen in the S&P 500.  Since then, the long run returns with the USMV have also managed to beat those of the benchmark index which is a testament to its consistently strong performance over time. There is a reasonably low expense ratio in place with USMV of just 0.15%, which means that you will only be paying $15 for every $10,000 invested, making it one of the cheaper index ETFs that you will be dealing with. There has been a noticeable shift in investors moving away from a lot of core index investments towards the likes of USMV so they can ride out any volatility that is hampering their investments.

PowerShares S&P 500 Downside Hedged Portfolio (PHDG)

With an expense ratio of 0.39%, PowerShares S&P 500 Downside Hedged Portfolio (PHDG) is another option for investors looking to cut through volatility in the markets. It is nigh on impossible to accurately predict what volatility will do on a given day or week and it is also not ideal trying to react to every single minor move in the market. The key is finding a balance in between and gauging which events are significant in the overall scheme of things and how they affect the volatility levels in the medium term for a given stock or index. The PHDG ETF allows you to automatically change from different classes of assets depending on what the medium to long term horizon looks like.

This ETF tracks the Dynamic VEQTOR Index on the S&P 500 which is an index with the aim of generating returns of excess no matter what type of market environment is currently in place. They do so by holding a variety of asset classes including bonds, equities, cash and volatility futures. Their allocation among these different asset classes is never static, but it changes in accordance to how the sentiment in the market changes. Therefore, when levels of volatility start to increase and the market beings to turn south, they will sell off a portion of their equities and put more money into the likes of futures, cash and bonds which offer a more consistent return that hedges against volatility

Goldman Sachs ActiveBeta International Equity ETF (GSIE)

With an expense rate of just 0.25%, this Goldman Sachs ActiveBeta International Equity ETF (GSIE) I one of the most reasonable around in terms of the volatility managing ETF options. All across the world, stocks have been experiencing high levels of volatility, it is not just confined to a single region. Markets are in turmoil in many places and there are additional factors to consider when dealing with international payments, such as trading times and exchange rates. Therefore, you may be in quite a precarious position at the moment with rising volatility. This GSIE ETF gives you the wherewithal to address these issues in a clear-cut manner. As a smart-beta ETF, they utilise different types of screens to try and identify profitable opportunities no matter where in the world they may be. Predominantly, Goldman Sachs focuses on 4 different metrics when it comes to picking investments. They are investments with low volatility, high-quality, strong momentum and possess good value for the investor. Add all of these metrics together and they have created an ETF that brings together some of the best investment opportunities to be seen in the developing world. They have seen some strong results the past 12 months or so by taking this approach and it will be interesting to watch how these core principles perform as the rocky periods of high volatility continues.

Vanguard High Dividend Yield ETF (VYM)

The Vanguard High Dividend Yield ETF (VYM) is one of the classic ETFs that a lot of investors are already going to be very familiar with. Investing in dividend yielding stocks has often been a way in which investors have tried to combat volatility. These are consistent stream of returns that you receive as an investor and they will help to combat losses your portfolio is currently experiencing as stock prices fall. Usually, traditional dividend paying stocks are not going to be as volatile as those without dividends in the long term. Because they are so useful for their protection qualities, people are not too interested in selling them. This VYM ETF has long been a popular choice among investors who prefer investments that provide dividends.

This ETF is tracking the FTSE High Dividend Yield Index. This index is made up of large cap stocks which pay investors dividends that are greater than average in comparison to the market as a whole. The high-yield terminology may throw you off somewhat, but you can be sure that this portfolio is not full of poor payers and uncertain dividends. You will be dealing with those companies who have a strong history of paying out dividends, such as the likes of Johnson & Johnson. If you get involved with this VYM ETF, you will be collecting your annual dividends that will keep your account ticking over in times of high volatility.

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iShares U.S. Preferred Stock ETF (PFF)

Preferred stocks are a popular option for those looking to combat volatility, something which iShares U.S. Preferred Stock ETF (PFF) offers. Preferred stocks combine stock and bonds together which means that they are going to be not as volatile in nature as normal equities. They usually generate decent dividends and the par value is usually the floor price for this type of security. They currently have about $16.5 billion under management and they are one of the most established ETFs around. In terms of preferred stock ETFs, they have the highest trading volume among them all.

This ETF tracks the S&P US Preferred Stock Index, something which is made up of 302 types of preferred stocks. This means that the portfolio is going to be properly diversified and there is going to be an eradication of any issues with pay-outs or dividends. Most of the assets that make up this portfolio are going to be related to finance as they tend to be the industry that issues the most preferred stock. The next industries on the list (at a distance) will be energy and healthcare. In terms of fighting volatility, this ETF has shown consistent return over the short and medium term. It has a low expense ratio and it will give investors a consistent return without having to worry about riding a wave of volatility.

Best of the rest

The Legg Mason Low-Volatility High-Dividend ETF (LVHD) is made of securities that follow a strict set of guidelines. They currently have about half a billion dollars in assets under their management and their portfolio is made up of 87 stocks. They pay particular focus to the consumer staples and utilities sectors, with these combined attributing for more than 35% of the portfolio. The VictoryShares US Large Cap High Div Volatility Wtd ETF (CDL) tracks the CEMP US Large Cap High Dividend 100 Volatility Weighted Index. This is an index that places a particular focus on minimising risk. They look at stocks by using the previous 180 days standard deviation, as well as ensuring that they have had positive earnings for four quarters consecutively or more. They have performed well and they are also heavily focused on consumer staples and utilities. The O’Shares FTSE Quality U.S. Dividend ETF (OUSA) is the largest ETF that O’Shares looks after. It is tracking the FTSE USA Qual/Vol/Yield 5% Capped Factor Index. Despite this index not being dedicated to hedging against high volatility, having an overall low volatility make up is a vital part of their selection process for what stocks make up the index. Their goal as an ETF is to look at key metrics such as liquidity, dividend yield thresholds, high quality and certain market capitalisation figures for companies of large and mid sizes that also pay dividends and are based in the United States.

1
of 5 Forex Broker Forex.com
Currency pairs 80 Currencies
Max. Lever 1:50
Trading size Micro-Lot
Minimum deposit $ 50
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Risk warning: Capital can be lost. Terms and conditions apply.
2
of 5 Forex Broker TD Ameritrade
Currency pairs 80 Currencies
Max. Lever 1:50
Trading size Micro-Lot
Minimum deposit $ 0
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Risk warning: Capital can be lost. Terms and conditions apply.
3
of 5 Forex Broker Interactive Brokers
Currency pairs 100 Currencies
Max. Lever 1:50
Trading size Micro-Lot
Minimum deposit $ 10.000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 5 Forex Broker Oanda
Currency pairs 60 Currencies
Max. Lever 1:50
Trading size Micro-Lot
Minimum deposit $ 0
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Risk warning: Capital can be lost. Terms and conditions apply.
5
of 5 Forex Broker Ally Invest
Currency pairs Currencies
Max. Lever
Trading size Micro-Lot
Minimum deposit $
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 14 ETF Broker Placetrade
ETFs w/ discount 0
Custody fee $0
Min. deposit $ 5.000
Trading from $1,50
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 14 ETF Broker Betterment
ETFs w/ discount 0
Custody fee 0.25%
Min. deposit $ 0
Trading from $0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 14 ETF Broker Lightspeed Trading
ETFs w/ discount 0
Custody fee $0
Min. deposit $ 10.000
Trading from $2,50
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 14 ETF Broker Robinhood
ETFs w/ discount 3,000
Custody fee $0
Min. deposit $ 0
Trading from $0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 14 ETF Broker Firstrade
ETFs w/ discount 700+
Custody fee $0
Min. deposit $ 0
Trading from $0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 11 Stock Broker TD Ameritrade
National fees $6,95
Custody fee $0
Intl. fees
Dep. Protection $500.000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 11 Stock Broker SogoTrade
National fees $2,88
Custody fee $0
Intl. fees
Dep. Protection $500.000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 11 Stock Broker Placetrade
National fees $1,50
Custody fee $0
Intl. fees $1,50
Dep. Protection $500.000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 11 Stock Broker Ally Invest
National fees $3,95
Custody fee $0
Intl. fees
Dep. Protection $500.000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 11 Stock Broker Firstrade
National fees $2.95
Custody fee 0
Intl. fees $0
Dep. Protection As per SIPC guidelines.
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.

Conclusion:

There are Low Volatiiltiy ETF’s Even in a Time of High Volatility

As you will have seen, the market is experiencing significant levels of volatility at the moment, which means that more risk averse investors are on the lookout for ways in which they can protect their holdings. They are willing to give up on chasing the significant returns for a more consistent portfolio that does not constantly swing up and down.

There are a number of quality ETFs that focus on providing low volatility ETF options to investors and it clearly has been paying off the last 12 months or so. You have seen many different options of low volatility ETFs, so it’s then up to you to conduct your own research on these funds to decide which might best suit your specific needs. Once you have done this research, you can comfortably make a decision on which you want to invest in.

ETF Highlights