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  1. Innovative ETFs Channel
  2. High Dividend, Low Volatility Factor Outperforms YTD
Innovative ETFs Channel
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High Dividend, Low Volatility Factor Outperforms YTD

Elle CarusoOct 04, 2022
2022-10-04

No matter which factor you look at, the S&P 500’s returns this year have been bleak.

The S&P 500 in September posted its worst month since March 2020, declining 9.2% last month, bringing the index’s total return for the first three quarters of the year to a dismal -23.9%, according to S&P Dow Jones Indices.

The market had rallied in the beginning of the month, peaking on September 12 with a 4.0% gain. Following the release of the Consumer Price Index on September 13, which showed unexpectedly strong, and decidedly non-transitory, core inflation, the market subsequently declined by 12.7% through month-end, according to S&P Dow Jones Indices.

Risk-off factors are holding up better than others, however. The S&P 500 Low Volatility High Dividend Index has managed to close out the first nine months of the year declining just 11.0%, substantially mitigating the losses of the S&P 500. Growth and pure growth, on the other hand, closed out the third quarter posting year-to-date declines of 30.4% and 30.9%, respectively.

Investors can add exposure to the S&P 500 Low Volatility High Dividend Index, which is composed of 50 securities traded on the S&P 500 Index that historically have provided high dividend yields and low volatility, with the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD C+).

In order to achieve its goal, SPHD exhibits sector tilts, overweighting utilities, real estate, consumer staples, and materials, and underweighting IT, consumer discretionary, healthcare, and industrials, compared to the S&P 500. 

SPHD imposes guardrails that prevent a single sector from dominating the portfolio, with each sector limited to 10 stocks and 25% of the portfolio at rebalance. Between rebalances, better-performing sectors can become a bigger slice of the pie, according to VettaFi.

For more news, information, and strategy, visit the Innovative ETFs Channel.

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