One of the certainties in any market is that volatility will always strike. While the S&P 500 has been trending higher, investors can brace themselves with two exchange traded funds (ETFs) from Invesco that provide strategic, low-volatility S&P 500 exposure.
The expectation is that rate cuts will occur towards the end of the year or into early next year. Markets are especially vulnerable to U.S. Federal Reserve interest rate guidance. Additionally, earnings reports can always be a catalyst for volatility. All that said, investors appear willing to accept the risk of market fluctuations.
“Stock investors are bracing for a spike in market volatility, and upcoming events such as Nvidia Corp.’s earnings report can exacerbate any moves, according to Goldman Sachs Group Inc. strategists,” Bloomberg reported. “The bank’s measure of risk appetite hit the highest since 2021 last week, driven by optimism around economic growth and monetary policy, but momentum has slowed.”
When volatility strikes, it’s ideal to have the Invesco S&P 500 Low Volatility ETF (SPLV ) as part of a portfolio. It can serve as a complement to current S&P 500 exposure with a broad-based fund or simply on its own for more risk-averse investors.
Per its base fund description, SPLV tracks the S&P 500® Low Volatility Index. The index is compiled, maintained, and calculated by Standard and Poor’s and consists of the 100 stocks from the S&P 500 Index with the lowest realized volatility over the past 12 months.
The relatively stable large- and mid-cap blend means that the fund cushions investors from sharp moves in the market. This is expecially important when things are trending lower during a big sell-off. However, when there’s upside, investors can capture those gains and get a tinge of growth with that mid-cap component.
A Low Volatility Income Option
Fixed income investors looking for a low volatility option that derives income from S&P 500 companies will want to look at the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD ). To achieve its yield, SPHD mainly allocates to large-cap growth and mid-cap value companies, thereby mitigating credit risk.
Per its fund description, SPHD seeks to track the investment results (before fees and expenses) of the S&P 500® Low Volatility High Dividend Index. The index provider compiles, maintains, and calculates the underlying index, which is composed of 50 securities in the S&P 500® Index that historically have provided high dividend yields with lower volatility. To get exposure to SPHD, ETF investors are looking at a net expense ratio of 0.30%.
With a 30-day SEC yield of 4.46%, this offers investors a complementary component to an existing fixed income portfolio. Or alternatively, a standalone fixed income product. To that note, SPHD has a 30-day SEC yield of 4.46% as of May 22.
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