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Low-Volatility and Quality ETFs: What Investors Need to Know

Neena Mishra
  • (1:00) - Why Are Low Volatility ETFs So Popular?
  • (6:50) - Overview of Low Volatility ETFs: SPLV, XMLV, XSLV
  • (9:30) - Understanding What A Minimum Variance ETF Is: SPMV
  • (16:15) - How Do You Define A Quality Stock?
  • (20:00) - Invesco S&P 500 Quality ETF: SPHQ
  • (24:20) - Does The Improving Stock Environment Hurt These ETF Strategies?
  • (27:35) - How Can Factor ETFs Benefit An Investor’s Portfolio?
  •             Podcast@Zacks.com

In this episode of ETF Spotlight, I speak with Nick Kalivas, senior equity ETF strategist at Invesco. We discuss low-volatility and quality ETFs that have been very popular with investors this year.

According to traditional finance theories, investors demand a higher rate of return for taking on greater risks but academic studies show that lower risk stocks have produced higher risk-adjusted returns than the broader markets over the long term.

The low volatility anomaly has been observed in stock markets across the globe. Nick explains why and whether the factor can continue to outperform.

The Invesco S&P 500 Low Volatility ETF SPLV holds 100 stocks from the S&P 500 Index with the lowest realized volatility over the past 12 months. The Invesco S&P MidCap Low Volatility ETF XMLV and Invesco S&P SmallCap Low Volatility ETF XSLV follow a similar approach.

The Invesco S&P 500 Minimum Variance ETF SPMV takes a different approach in selecting its holdings. What are the differences between low and minimum volatility strategies?

Many academic studies have demonstrated that high-quality companies consistently deliver higher risk-adjusted returns than the broader market over the long term and also able to better withstand an economic downturn.

The Invesco S&P 500 Quality ETF SPHQ selects stocks from the S&P 500 Index that have the highest quality score, defined by return on equity, accruals ratio and financial leverage ratio. Apple AAPL, Microsoft MSFT and Mastercard MA are its top holdings.

Investors have been rushing into riskier assets in the past few weeks. Can low volatility & quality strategies still attract investors?

Factor returns have generally proven to be highly cyclical and timing the market is never easy. How should investors use these strategies in a portfolio?

Please visit Invesco.com to learn more these ETFs. Make sure to be on the lookout for the next edition of ETF Spotlight! If you have any comments or questions, please email podcast@zacks.com.

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Apple Inc. (AAPL) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Invesco S&P 500 Low Volatility ETF (SPLV): ETF Research Reports
 
Invesco S&P 500 Quality ETF (SPHQ): ETF Research Reports
 
Mastercard Incorporated (MA) : Free Stock Analysis Report
 
Invesco S&P MidCap Low Volatility ETF (XMLV): ETF Research Reports
 
Invesco S&P 500 Minimum Variance ETF (SPMV): ETF Research Reports
 
Invesco S&P SmallCap Low Volatility ETF (XSLV): ETF Research Reports
 
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