Sometimes in 2020 it felt like the markets were on a rollercoaster. Global blockages, low interest rates, increased stimulus measures and the recent US presidential election all play a part in growing market volatility this year.
On Oct. 29, the main measure of US stock market volatility hit a recent intraday high of 41.16. It has since been declining and is now back at around 25. However, levels could pick up again in the coming days.
Finding ways to navigate periods of heightened volatility without overreacting to momentary hiccups is key. Diversification across countries and sectors is a tool to manage risk when volatility increases.
In September, we examined one fund that could help investors. Below we will look at two more ETFs that provide diversification during periods of higher volatility:
1. iShares MSCI USA Min Vol Factor ETF
Current price: $ 66.09
52 Week Range: $ 45.75 – $ 69.79
Yield: 2.01%
Expense Ratio: 0.15%
The iShares MSCI USA Min Full Factor ETF (NYSE :), traded in 2011 aims to provide exposure to US-based stocks that are likely to be less volatile than the broader stock market.
USMV has 194 holdings and tracks the MSCI USA Minimum Volatility (USD) Index. The top ten companies comprise approximately 15% of net assets in excess of $ 33 billion.
In terms of sector allocation, information technology has the highest weighting (22.25%), followed by healthcare (15.72%), consumer staples (11.91%), financial services (11.42%) and utilities (8, 67%).
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The companies leading the fund include the global clean energy company NextEra Energy (NYSE 🙂 wireless service provider T-Mobile US (NASDAQ 🙂 fast food heavyweight McDonald & # 39; s (NYSE 🙂 technology giant Microsoft (NASDAQ 🙂 and Waste Management (NYSE 🙂 whose name speaks for itself.
Since the beginning of the year, USMV is up 2%. The lagging P / E and P / B ratios stand at 23.24 and 3.66.
It should be noted that the beta of the fund, which shows how sensitive the price is to market changes, is 0.74.
Since the broader market beta, such as the, is 1, a fund like USMV with a beta of 0.74 would be expected to yield 74% as much as the total market. On the other hand, a stock with a beta of 1.3 would move 30% more than the total market. A stock or fund with a low beta has less risk but also a lower return.
Although the best use of the beta is discussed, as it does not say anything about the fundamentals of a company or companies within a fund, it may indicate short-term risks.
2. First Trust Developed Markets ex-US Small Cap AlphaDEX Fund
Current price: $ 38.66
52 Week Range: $ 22.32 – 39.00
Yield: 2.64%
Expense Ratio: 0.80%
First Trust Developed Markets ex-US Small Cap AlphaDEX® Fund (NASDAQ 🙂 provides access to a wide variety of stocks outside the US.
Companies are ranked based on fundamental growth and value measures. Increase in price, sales at price, and one-year revenue growth are ways of measuring growth, while the value of a company is judged by book value to price, cash flow to price, and return on assets.
UK-based electrical appliance retailer Ao World (LON 🙂 Sweden-based e-commerce group Boozt (OTC 🙂 South Korea-based sea container line HMM (ST: SWMA) and Japan-based Genky Drugstores (T 🙂 are among the top names in the fund.
FDTS has 406 companies. Shares of companies from Japan lead the fund (33.25%), followed by holdings in South Korea (23.04%), Canada (5.30%) and Australia (5.0%).
Year-to-date, the fund was down 2% and closed at $ 38.66 yesterday. The underlying P / E, P / S and P / B ratios are 8.63, 0.43 and 0.82, respectively. The current dividend yield is 2.48%. The fund may be attractive to investors looking to diversify some of their capital outside of the US markets.
