Market volatility is an essential part of investing to understand, as the prices of assets will always change and fluctuate. Investors are always looking for ways to hedge against volatility and reduce risks. When it comes to investing in ETFs, it’s achieved by choosing a well-balanced and diversified portfolio of assets.
In this article, we’ll go over some of the ETFs with the lowest price fluctuation that also contains dependable assets and stocks of respectable companies. These still provide steady growth and require little work on the part of the investor.
iShares MSCI USA Min Vol Factor ETF (USMV)
iShares MSCI USA Min Vol Factor ETF is built to provide exposure to mid-size US stocks and reduce risk in the process. It does so by tracking the MSCI USA Minimum Volatility Index and uses quantitative models to maintain a balance between risk reduction and growth.
The ETF includes some of the household name stocks, including Johnson & Johnson, Coca-Cola, and PepsiCo. These companies are a safe bet for a steady income and guaranteed brand loyalty. It also contains stocks from the healthcare sector and utilities. Those sectors aren’t affected by economic downturns as much as others.
It’s important to note that USMV will underperform during a bull market, but that’s not what it’s for. It will also do much better than its competitors when the market goes through a downturn. For those looking to maintain assets over a long time, it’s a safe choice.
USMV has an expense ratio of 0.15 percent, a 12-month yield of 1.55 percent, and 23 different assets. It focuses on American assets, most of all, which may be an additional risk in terms of diversification.
Invesco S&P 500 Low Volatility ETF (SPLV)
Invesco S&P 500 Low Volatility ETF (SPLV) uses a very simple approach to risk reduction. It tracks the S&P 500 Low Volatility Index and chooses the 100 companies with the lowest volatility in the last 12 months out of the S&P 500. The investors, therefore, get all the stability of the S&P 500 with an additional focus on risk reduction.
The ETF focuses on utilities, real estate, and consumer staples. The assets include Duke Energy, Kellogg’s, and Waste Management, all of which are brands with reliable recognition. The fund rebalances every three months to reflect the changes in risk levels.
SPLV has the same flaw as most of the ETFs on our list, and that is that it won’t capture the rallies as much as some of the competitors. It is, however, much better during dry spells on the market since it won’t be as affected by them.
The fund is made out of 102 different assets, with a combined worth of $124.1 billion. It has a 2.07 percent yield in the span of 30 days. One year’s return is about 13 percent. The expense ratio is somewhat higher than that of other ETFs with this level of risk – it’s set at 0.25 percent.
Vanguard Dividend Appreciation ETF (VIG)
Vanguard Dividend Appreciation ETF (VIG) has a unique way of filtering out the companies that are too risky. It tracks the S&P US Dividend Growers Index and selects the companies that have raised their dividends for ten years in a row.
This includes companies that have steady cash flows and are household names, such as Microsoft, Johnson & Johnson, and Procter & Gamble. VIG avoids companies that make a splash but soon disappear from the market. The yields are, therefore, smaller than with others but steady.
VIG isn’t technically a low-volatility ETF, but experience shows that companies that raise their payouts over the years can also sustain losses when the market is bad. There are no speculative stocks in VIG either.
VIG has a very low expense ratio of 0.05 percent, a yield of 1.8 percent, holds $102 billion in assets, and a yearly return of about 8 percent. About twenty percent of the assets are in tech, while another 20 are in financial services. Apple is the biggest individual holding, accounting for 3 percent of the portfolio.
ProShares Bitcoin Strategy ETF (BITO)
Bitcoin ETFs were allowed by the SEC just a year ago, and they are a way for an investor to profit from cryptocurrencies without buying any themselves. It tracks the performance of front-month CME Bitcoin Futures. Investors don’t need to know anything about crypto wallets, exchanges, or tech in order to use them.
Bitcoin is widely used in both traditional markets and as a speculative asset. For instance, some of the best crypto sports betting sites are widely used by young players, but luxury items also allow crypto payments. For investors who want to ease into this new market, BITO is the least volatile way to go.
BITO is compliant with the latest regulations of the Commodity Futures Trading Commission (CFTC), and therefore, it provides a custody-free and compliant way to invest in cryptos alongside traditional low-volatility ETFs. Since it offers higher yields than traditional ETFs, it should be used in moderation.
BITO holds 2.1 billion in assets, and it has an expense ratio of 0.95 percent. The yield is 75 percent, and yearly returns are about 30 percent. It’s important to note that it has existed since 2021, so there is no long-term data to plan with. However, the new administration in the US has a pro-crypto attitude, and the investors are pleased with it.
Vanguard Total Bond Market ETF (BND)
The Vanguard Total Bond Market ETF (BND) is an ETF focused on the US bond market. It’s generally considered to be the least risky way to invest since the government backs the US bonds. It tracks the Bloomberg U.S. Aggregate Float Adjusted Index.
The assets in BND include US Treasuries, mortgage-backed securities, and corporate bonds. AAA-rated securities and bonds issued by the government are the least risky assets out there, and their yields are low but steady. Corporate bonds are also included, and they account for about 25 percent of the fund, while government bonds are at 50 percent.
BND isn’t affected by the equity sell-offs, which makes it a perfect tool for lowering volatility. Some also use it as a core bond allocation ETF. It’s mostly used by retirees and conservative investors who don’t have a problem with slowly building their assets.
BND holds about $342.04 billion in as many as 17,000 assets. The expense ratio is very small at 0.03 percent, 30-day yields are at four percent, and the average investor holds the ETF for about 6.5 years. Vanguard Fixed Income Group manages it.
iShares TIPS Bond ETF (TIP)
TIP provides exposure to US Treasury Inflation-Protected Securities (TIPS). Those are the government-issued bonds, which are further indexed based on inflation. As inflation rises, so do the principal and the interest payments. The purchasing power, therefore, doesn’t change with inflation.
It holds a variety of TIPS of different maturity, but all of them are issued and backed by the government, which makes them low risk. Macroeconomic uncertainty won’t affect this ETF, or at least not nearly as much as with others. However, it can outperform regular bonds when the market is doing well.
It’s also important to note that there’s one macroeconomic factor that will affect TIP more than others, and that’s interest rate changes, which are affected by the central bank. It’s a long-term ETF to buy and hold for slow and steady growth. Twenty percent of the fund is allocated to assets other than bonds.
TIP holds over 14 billion in assets, the expense ratio is 0.18 percent, yields are at 2,4 percent, and one-year returns are at 7.3 percent. It’s important to note that the 3-year returns are much lower, at less than one percent.
iShares Select Dividend ETF (DVY)
The iShares Select Dividend ETF (DVY) is focused on companies with consistent and high payouts. It tracks the Dow Jones U.S. Select Dividend Index. The index focuses on profitability, payout ratio, and dividend history. Most of the portfolio is made up of companies from the defensive sectors.
The companies include utilities, consumer staples, and the industrial sectors. The most profitable ones are usually Chevron, Oneok, and Altria. Other than those, the fund excludes real estate investment trusts, which are otherwise common for low-risk ETFs.
This ETF doesn’t offer rapid capital appreciation, but it does work well when the market is volatile since it provides a hedge. It’s mostly made for income-seeking investors but for those who are on the risk-averse side, as market pullbacks usually don’t affect companies from those industrial sectors.
The fund manages over 19 billion in assets; the expense ratio is 0.38 percent. One-year returns are over 10 percent, and 3-year returns are over 3 percent. The yields are at 3.6 percent. The biggest part of the ETF is Altria Group—Inc., with just 2.5 percent. Utilities make up 25 percent of the total, and so do financial services.
JPMorgan Equity Premium Income ETF (JEPI)
JEPI provides investment options for generating income while managing the risks involved. The ETF consists of US stocks and bonds, as well as equity-linked notes (ELNs), to generate extra income. ELNs combine features of fixed-income investment and equities. They are debt instruments tied to the value of a particular stock.
Top stocks include blue chip companies with a known brand value and steady income streams. The biggest ones include AbbVie, PepsiCo, and ExxonMobil. It produces higher income than most ETFs on our list, while it caps upside for the purpose of lowering.
JEPI is especially useful in uncertain markets and when the upside may be limited. It offers plenty of capital preservation while providing yields that are steady and easy to predict. Income-focused investors and retirees prefer this sort of ETF. The goal of such an investor is to find a balance between equity exposure, cash flow, and risk management.
JPMorgan Equity Premium Income ETF has an expense ratio of 0.35 percent. It has net assets of 39 billion, a yield of seven percent, a yearly return of five percent, and the same return in three years. Visa and Mastercard are the biggest assets, with one and a half percent each.
Invesco Balanced Multi-Asset Allocation ETF (PSMB)
Invesco Balanced Multi-Asset Allocation ETF (PSMB) offers a blend of carefully chosen assets made to diversify between equities, bonds, commodities, and alternatives. Allocations are made to reach volatility targets so that the returns are smooth. It also features risk-parity-like, which balances risks across different assets.
PSMB isn’t risky because it’s made to reduce exposure to a single asset. When equities become too volatile, the fund focuses on commodities and alternatives instead, and vice versa. PSMB is a choice for those who are looking to get an all-in-one solution that’s actively managed.
Between 45 and 70 percent of the assets go into equity ETFs, 25 percent go towards fixed-income ETFs, and 10 percent go towards fixed-income securities and international equities. These include American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs). The sub-advisor that actively manages the fund conducts strategic asset allocation. Rebalance is done every three months.
Net assets are about 24 million, yields are about 3 percent, and the expense rate is 0.33 percent. Yearly returns are about 4 percent, and 3-year returns are at 6 percent. Fifteen percent of the ETF goes towards technology, and the same goes to healthcare.
iShares Edge MSCI Min Vol EAFE ETF (EFAV)
EFAV is the international counterpart to USMV. Instead of the US, it focused on the developing markets in Europe, Australia, and Asia. It tracks the MSCI EAFE Minimum Volatility Index and chooses the stocks with the lowest risk. The portfolio includes some of the biggest and most well-known companies out there, such as Nestlé, Roche, and Unilever.
Foreign stocks are a bit more risky than the US ones due to several factors. It depends on geopolitical issues more than the US ones, and some foreign currencies are more volatile. However, the companies working in the food industry are always safer than competitors from other fields.
EFAV will lag a bit in comparison to aggressive strategies oriented toward the global market, but that’s the tradeoff investors are willing to take in order to reduce the risks. It’s a low-yielding ETF best suited to long-term growth and balancing a larger portfolio.
EFAV manages 4.8 billion in assets, the expense ratio is 0.2 percent, the yield is 2.9 percent, and in a year, it profits as much as 20 percent. Zurich Insurance Group AG is the biggest part of the portfolio, but it’s only 1.5 percent of the whole ETF.
Conclusion
ETFs can be an easy way to manage across different assets and to have a steady and secure yield over the long run. The ETFs on our list are made to be averse to risk but still provide steady profit. That’s why they are mostly used by those who plan for the long run and have steady finances in general.
The assets in the ETFs are diversified based on how much they yield, what industry they are in, and many other features and qualities so that they are less risky. Such ETFs should be at least a part of a larger and more aggressive portfolio.
