Volatility, the potential for the market or a stock to swerve sharply in value, serves as a deterrent for many prospective investors. After all, who wants to lose a sizable portion of hard-earned savings in a flash? Luckily for investors such as these, there exists a smart beta ETF designed specifically to offer a calmer approach: iShares MSCI USA Minimum Volatility (USMV).
USMV provides two layers of low-volatility protection. First, it follows an index composed of U.S. equities selected by their relatively low levels of volatility characteristics when compared to the broader market. Second, as a smart beta fund, USMV further weights its investment in each security of the index with regards to volatility to reduce risk even further.
The reduced-risk approach of this non-diversified fund has proven profitable this year, as USMV is up 7.35% since 2014 began. This ETF also offers a dividend yield of 2.22%.
Read more about this smart beta approach to low-volatility investing at Eagle Daily Investor.