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Tap These Low-Volatility ETFs to Shrug Off Coronavirus Fears

Sweta Jaiswal, FRM

The stock market rout on Mar 9, when all three major U.S. indices saw their biggest one-day percentage declines since 2008, has shook investors. The growing fears of a slowdown in global economic growth due to shutting down of economic activities for containing the spread of the virus were the major reason behind the plunge.

Moreover, oil prices slumped more than 20% on the same day, recording their worst single-day decline since the start of the first Gulf war in 1991. Saudi Arabia’s surprise decision to increase crude output starting next month caused the carnage in oil prices as Russia disagreed with Saudi Arabia’s proposed plan to cut output to manage the impact of coronavirus. Notably, Saudi Arabia now aims to increase oil output starting next month, probably more than 10 million barrels a day, as a response to the implosion of OPEC+ alliance with Russia (read: Bull & Bear Tug of War for Oil: ETFs in Focus).

Going on, the yields on Treasury 10-year note and 30-year bond had plunged to all-time low level on Mar 9. Various research firms and investment banks have started estimating the impact of the coronavirus on the global economy. In this regard, a report by The Guardian projects that the global economy may lose more than $1 trillion in 2020.

Notably, Goldman Sachs recently trimmed the U.S. economic growth forecast for the first quarter of 2020 to 1.2% from 1.4% due to aggravating coronavirus concerns. The current GDP projections compare unfavorably with the 2.1% increase in economic growth in the fourth quarter of 2019 and 2.3% rise in 2019 (read: ETFs to the Rescue as Coronavirus Wreaks Havoc).

ETFs in Focus

Low-volatility products could be intriguing choices for those who want to stay invested in equities during turbulent market conditions. The following options are intriguing:

iShares Edge MSCI Min Vol USA ETF USMV

This fund offers exposure to 207 U.S. stocks with lower volatility characteristics than the broader U.S. equity market by tracking the MSCI USA Minimum Volatility Index. With AUM of $37.43 billion, the product charges 0.15% in expense ratio. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: ETF Strategies to Play the Rising Virus-Induced Volatility).

Invesco S&P 500 Low Volatility ETF SPLV

This ETF provides exposure to stocks with the lowest realized volatility over the past 12 months. It tracks the S&P 500 Low Volatility Index and holds 100 securities in its basket. SPLV has amassed $11.97 billion in its asset base. It charges 25 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook (read: Low Beta ETFs to Consider in an Uncertain Market).

iShares Edge MSCI EAFE Minimum Volatility ETF EFAV

EFAV looks to replicate the performance of international equity securities that have lower risk. The fund tracks the MSCI EAFE Minimum Volatility (USD) Index and holds 279 securities. It has amassed $12.24 billion in its asset base. EFAV charges 20 bps in annual fees and has a Zacks ETF Rank #3 with a Low risk outlook (read: ETFs to Play as Dow Slid 12% Last Week).

iShares Edge MSCI Min Vol Global ETF ACWV

The fund provides exposure to global stocks with potentially less risk. The fund tracks the MSCI All Country World Minimum Volatility Index and holds 447 securities. It has an AUM of $5.55 billion in the asset base. ACWV charges 20 bps in annual fees and has a Low risk outlook (read: Bet on These Global ETFs on Likely Barrage of Stimulus).

Invesco S&P 500 High Dividend Low Volatility ETF SPHD

The fund seeks investment results that generally correspond (before fees and expenses) to the price and yield of the S&P 500 Low Volatility High Dividend Index. It holds 50 securities. The fund has an AUM of $3.25 billion in the asset base. SPHD charges 30 bps in annual fees and has a Medium risk outlook.

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iShares Edge MSCI Min Vol USA ETF (USMV): ETF Research Reports
 
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD): ETF Research Reports
 
iShares Edge MSCI Min Vol EAFE ETF (EFAV): ETF Research Reports
 
iShares Edge MSCI Min Vol Global ETF (ACWV): ETF Research Reports
 
Invesco S&P 500 Low Volatility ETF (SPLV): ETF Research Reports
 
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