The S&P 500 has fallen almost 3% within the past month, highlighting the volatility that typically hits at the end of the summer. For volatility through the end of 2023, investors may want to consider two active ETFs from American Century.
Investors can simply wait for a September slowdown to occur. However, a confluence of factors could lead to further volatility in the equities market. The main market mover continues to be interest rates. This is especially so with inflation sticking around longer than anticipated, which could lead to further rate hikes.
That said, traders may be more optimistic about eventual interest rate cuts. That said, nobody has a crystal ball. If volatility persists, investors can position their portfolios to lessen the blow.
Addressing Volatility Through Large-Cap Value Exposure
One way is to get more large-cap value exposure. As opposed to mid- and small-cap equities, large-cap companies are better equipped fundamentally to withstand heavy volatility.
“Large-cap companies—those with market caps larger than $10 billion and up to more than $1 trillion—are usually companies with established brands and strong balance sheets,” a Forbes Advisor article explained.
“This makes them less volatile than smaller startups that have yet to make a name for themselves or turn a significant profit,” the article added. “Large-cap stocks also have more interest from analysts and the media, allowing investors to make better decisions on whether to buy, sell or hold.”
Given this, ETF investors may also want to focus on large-caps that offer value to also take advantage of upside when markets rally. That said, consider the American Century Focused Large Cap Value ETF (FLV ).
The fund seeks long-term capital growth and income by investing in a high-conviction portfolio of high-quality, large-cap companies that the managers believe are undervalued. The active management aspect allows the holdings to be adjusted when market conditions suggest changes.
Turning the Volatility Volume Down
Another way to counter volatility is to address it directly via funds like the +American Century Low Volatility ETF+ (LVOL ). Also actively managed, LVOL offers dynamic exposure at a low-cost expense ratio of 0.29%.
The fund screens for asymmetric, or downside, volatility and invests in companies with strong, steady growth. Furthermore, its focus is on strong fundamentals, wherein companies exhibit strong balance sheets with sustainable profit potential.
Its rebalancing strategy also gives LVOL pliability in the market when equities prices fluctuate wildly during heavy volatility. Like FLV, that flexibility is also attributed to its active management component.
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