ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Themes
      • Active ETF
      • Artificial Intelligence
      • Beyond Basic Beta
      • China Insights
      • Climate Insights
      • Core Strategies
      • Crypto
      • Disruptive Technology
      • Energy Infrastructure
      • ETF Building Blocks
      • ETF Investing
      • ETF Education
      • ETF Strategist
      • Financial Literacy
      • Fixed Income
      • Free Cash Flow
      • Innovative ETFs
      • Institutional Income Strategies
      • Leveraged & Inverse
      • Managed Futures
      • Market Insights
      • Modern Alpha
      • Multifactor
      • Responsible Investing
      • Retirement Income
      • Tax Efficient Income
    • Asset Class
      • Equity
        • U.S. Equity
        • Int'l Developed
        • Emerging Market Equities
      • Alternatives
        • Commodities
        • Gold/Silver/Critical Minerals
        • Currency
        • Volatility
      • Fixed Income
        • Investment Grade Corporates
        • US Treasuries & TIPS
        • High Yield Corporates
        • Int'l Fixed Income
    • ETF Ecosystem
    • ETFs in Canada
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. 3 Smart Beta ETF Strategies to Limit Downside Risks, Capture Further Upside Potential
News
Share

3 Smart Beta ETF Strategies to Limit Downside Risks, Capture Further Upside Potential

Max ChenMar 21, 2019
2019-03-21

In the late stage of the economy cycle, investors still want to be in the markets but want to hedge their bets. One way to still play the game but remain defensive is through a smart beta exchange traded fund strategy.

“One of the most important things is diversification. Because we think about all the risk factors that we have out there – trade wars, government shutdowns, slowing growth, you don’t know which factors are necessarily going to work or which securities are going to work, so having a diversified approach to your stocks and to the factors you’re exposed to is very important,” Mannik Dhillon, President, VictoryShares and Solutions, Victory Capital, said at Inside ETFs.

Dhillon explained that factors like minimum volatility can help protect investors in case of another pullback and a multi-factor approach would also better enable investors to capture further upside potential.


Content continues below advertisement

For example, the VictoryShares US 500 Enhanced Volatility Weighted ETF (CFO B), VictoryShares US EQ Income Enhanced Volatility Weighted ETF (CDC A-) and VictoryShares US 500 Volatility Weighted ETF (CFA B) are some options that investors can think about. The ETFs start with the broad market and screens for companies with four quarters of positive earnings. Those stocks are then weighted based on their standard deviation over the past 180 trading days. Stocks with lower volatility are given higher weightings and stocks with greater volatility are given lower weightings. Ultimately, all securities that pass the earnings criteria are present, just at different weights.

The VictoryShares volatility weighted approach should not be confused with low-vol strategies, which are designed to capture excess returns to stocks with lower-than-average volatility, beta, and/or idiosyncratic risk.

While low-vol ETFs may only hold companies that tend to exhibit smaller swings using the factor as a selection, the VictoryShares suite starts with the broad market and screens for companies with four quarters of positive earnings. Those stocks are then weighted based on their standard deviation over the past 180 trading days.

Additionally, the ETFs shift from a long position to cash position depending on market swings to help investors better manage risk exposure. When the ETF is less than 100% allocated in stocks or bonds, assets are invested in cash or 30-day T-bills. The reallocation process is rules-based and determined based on month-end index values.

For more ETF-related commentary from Tom Lydon and other industry experts, visit our video category on ETFtrends.com.

» Popular Pages

  • Tickers
  • Articles

Nov 28

Main Management Market Note: November 24, 2023

Nov 28

Could a Smart Beta Rebound Be in the Offing?

Nov 28

Black Friday Expectations & AI Hype

Nov 28

Industry Experts Share Upbeat Crypto Outlook for 2024

Nov 28

Look to ROUS for Defensive Value Equity Exposure

Nov 28

ETF Prime: Tom Lydon on Alternative ETFs and More 

Nov 28

How Harbor’s Large-Cap Growth ETF Compares to the Russell 1000 Growth

Nov 28

Real Estate: The Underrated Alts Segment

Nov 28

Commodities May Have Struggled, But Bright Spots Exist

Nov 28

Maintain Tech Exposures In Market Drawdowns With NUSI

QQQ

Invesco QQQ Trust Series I

SPY

SPDR S&P 500 ETF Trust

VOO

Vanguard S&P 500 ETF

XLK

Technology Select Sector SPDR...

SMH

VanEck Semiconductor ETF

VGT

Vanguard Information...

SCHD

Schwab US Dividend Equity ETF...

IYW

iShares U.S. Technology ETF

TLT

iShares 20+ Year Treasury...

VTI

Vanguard Total Stock Market...


Content continues below advertisement

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X