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Investment Profile

Investment Profile: Slow & Steady

  • Slow & Steady is made up of 100 low-volatility stocks from the S&P 500
  • The fund’s goal is to limit volatility
  • Potential returns can be lower, but so can potential losses
3 min read

Markets go up, and markets go down. Riding the financial rollercoaster can be fun for some investors, but just like real carnival rides, the ups and downs may not be for everyone.

The stock market is volatile, and some investors are more averse to volatility than others. While it can be a thrill to see your portfolio’s value increase when the markets are up, you can just as easily worry when economic times are not as good.

If you want to smooth out some of the ups and downs, you can consider investing in low-volatility funds, like Slow & Steady (ticker: SPLV), with Stash.

What makes a fund “low volatility?”

Volatility is a measure of risk, or a way of gauging uncertainty. Because there’s no such thing as a sure thing, financial securities always have an element of volatility associated with them. And some securities are more volatile than others.

A fund with low volatility, then, is a fund with lower levels of risk.

What’s in Slow & Steady?

Slow & Steady is Stash’s name for Invesco’s PowerShares S&P 500 Low Volatility ETF. The fund comprises roughly 100 of the least-volatile S&P 500 stocks in the S&P 500 Low Volatility Index, according to the fund’s prospectus.

It’s potentially a less risky fund because it covers, big, stable companies and sectors. The fund’s assets are mostly concentrated in utilities (23%), financials (20%), and industrials (17%), and 95% of the company stocks are located in the U.S.

The remaining 5% are in the U.K., Switzerland, and Ireland.

Among the fund’s biggest current holdings are Coca-Cola, Ecolab, PepsiCo, Lowes, and Berkshire Hathaway. Nearly 50% of the fund’s assets are concentrated in the financial and utilities industries, and another 18% are in the industrial sector.

Performance

The fund launched in 2011, and is managed by Invesco.

Since the fund’s goal is to reduce exposure to volatility, the fund hasn’t seen wild returns like you’d expect with riskier investments. Instead, the fund’s performance has been measured, and –as its name implies– slow and steady.

Year-to-date, the fund’s return is -1.99%, according to Morningstar. But that negative figure is anomalous compared to the fund’s past performance. In 2017, for example, the fund’s return was 17.32%, and in 2016, it was 10.09%. Its best year, since it launched, was 2013, when the fund returned 23.16%.

Are there similar funds?

Another Stash fund, Blue Chips (ticker: MGC) also tracks the U.S. Equity market. Blue Chips is the Stash nickname for the Vanguard Mega Cap ETF, which also includes some of the largest publicly traded companies in the U.S.

But there is one major difference in that some stocks from more traditionally volatile industries (like technology, for example) are more abundant in Blue Chips.

Since the Blue Chips fund takes on additional risk and volatility–which means the potential for larger returns and larger losses is higher– it has outperformed Slow & Steady so far this year. Year-to-date, the fund is up 2.26%, according to Morningstar. In 2017, it was up 22.61%.

Risks and considerations

For conservative investors, investing in Slow & Steady is one way to invest in the broad U.S. 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 an 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 portfolio weather the storm better during a down market.

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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Start investing in funds like this on Stash.

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By Sam Becker
Sam Becker is Stash's financial writer.

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This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

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