Low-Volatility And Quality ETFs: What Investors Need To Know

Running Length: 00:12:45

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 - Free Report) 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 - Free Report) and Invesco S&P SmallCap Low Volatility ETF (XSLV - Free Report) follow a similar approach.

The Invesco S&P 500 Minimum Variance ETF (SPMV - Free Report) 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 - Free Report) 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 - Free Report), Microsoft (MSFT - Free Report) and Mastercard (MA - Free Report) are its top holdings.

Disclaimer: Foreign exchange (Forex) trading carries a high level of risk and may not be suitable for all investors. The risk grows as the leverage is higher. Investment objectives, risk appetite and ...

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