Low Volatility ETF Investment Profile: Slow & Steady

low volatility
Picture this: four 500-horsepower hydraulic pumps launch you to speeds of 128 mph in 3.5 seconds. Strapped in, your body rockets up to 456 feet above the ground. Freefall. Six whole seconds of weightlessness, followed by perilous twists and turns.

That’s the experience you get with Kingda Ka, the world’s tallest rollercoaster. Even if you’re an adrenaline junkie and actually enjoy that kind of thing, you might be craving a different kind of experience when it comes to your hard-earned cash.

Would you rather ride Kingda Ka or a kiddie coaster?

Both provide the experience of going up and down. One provides a much more dramatic ride.

Similarly, the prices of investments go up and down on a second-by-second basis. Some go farther up and farther down than others. Simplistically, volatility measures the likelihood that an investment will have a steep climb or a sudden drop in its future, based on how it has performed in the past.

Stocks with lower volatility are less likely to rise and fall dramatically.

 

low volatility

Slow & Steady seeks to offer a smooth investment ride

Our Slow & Steady investment seeks to smooth out dramatic ups and downs by investing in low volatility stocks. Every quarter, the fund managers look at the stocks of the 500 largest publicly traded companies in America. They choose 100 stocks that have experienced the lowest volatility over the last quarter. At the time of this post, the fund includes companies like AT&T, Coca Cola, Waste Management Inc., Procter & Gamble, Lockheed Martin, and Johnson & Johnson.

What sets this investment apart?

Blue Chips and Slow & Steady both cover the U.S. Equity market, and both include some of America’s largest publicly traded companies. But there is one major difference between the two: when you remove the most volatile stocks from the list of the America’s biggest companies, guess who generally gets the boot? Technology, energy, and financial services stocks. Because these three industries are susceptible to wilder swings, they generally aren’t chosen for this investment.

This fund offers a little something for everyone

For conservative investors, it’s a great way to invest in the broad US. Equity market. For moderate and aggressive investors, it’s a way to balance riskier investments in your Stash. Over the last century, the market shows a long, steady, upward trend. During that time, though, there have been periods where the market took a downswing. Because this investment favors low volatility, it may help your Stash weather the storm better during a down market.

Take a look at the underlying fund

The name of this investment is PowerShares S&P500 Low Volatility ETF (SPLV). It’s managed by Invesco, a fund manager with $811.8 billion in assets under management. Because large companies tend to pay dividends to their shareholders, this fund has a steady history of paying dividends. The fund has a .25% expense ratio.







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