Many friends have asked me, the US stock market seems to be overheated, is there a crash crisis, and now that it has risen to such a high level, can it still invest? At this point in time, there are not a few friends with such worries, so the focus of this time is to explore what kind of ETF investment can be considered if you want to reduce risk?
When will the stock market fall sharply? We don't know, but if you feel anxious, the invisible pressure seems to be getting bigger and bigger, and you can't breathe, and there are only three ways you can take. First, reduce the code, increase the proportion of cash, the reason why you are afraid at the moment, mostly because the funds are too full. Second, hedging, U.S. stock options or the reverse ETF mentioned in the basic course, can be used for hedging. Third, change to invest in stocks or ETFs with relatively low volatility, in case the stock market really falls sharply, others fall more, I fall less, less loss is to earn, which is also the appeal of low volatility ETFs. Low volatility ETFs are one of the smart beta ETFs and a specific investment style, whether you are thinking high, or you want to reduce risk, or even if you want to practice first, you can consider low volatility ETFs.
There are more than two thousand ETFs in the US stock market, and there are many low-volatility ETFs, and it is necessary to pick out the ones that are satisfactory. If you look at the past one by one, the efficiency is too poor, we can borrow the website tool, search for [morningstar] in Google, and after the results come out, click the "ETF" link. Or you can choose later if you want to enter morningstar. In the lower right corner of the Tools, click "ETF Screener", this function must be registered to use. Once inside, there are three preset filters that you can also set yourself.
The theme of this time is low volatility ETFs, what data will be presented by low volatility, let's take a look at what is in the risk risk? There are standard deviations and betas, the larger the standard deviation, the more violent the stock price rises and falls, or the greater the risk, if you want to fluctuate low, the smaller the standard deviation, the better, beta is also similar meaning, beta is 1, representing the volatility is consistent with the broader market index, the beta value is 1.5, representing the volatility is 50% higher than the large market, the beta value is 0.5, representing the fluctuation is 50% lower than the large market, this side is the lower the better. The standard deviation is still beta, just pick one of them, and see which one you use more conveniently.
Here Gloria takes the standard deviation as an example, the volume is too small, so the liquidity "Liquidity" side, the average daily volume is added, and then to the performance "Performance" side, the 3-year market return "Market Return3-Year" is added. Then change the value, and the list of ETFs at the bottom will also change. For example, if you feel that low volatility is not paired with a high dividend, you can also add the dividend to the filter.
Knowing how to screen, the following to introduce you to a few typical low volatility ETFs, the first is only the US minimum volatility factor ETF, the US stock code is USMV, ETF name mentions the factor, or friends are a little unfamiliar with the word, what is the factor? It is a factor that affects the rate of return, and if according to statistics, it can then be reasonably explained that an effect can increase the return, then this effect is the effective factor.
So how does the USMV's low volatility factor perform? In fact, before the 2020 epidemic, low volatility ETFs are still quite concerned, we look at the technical line chart, the blue line is USMV, orange reality tracking S&P 500 SPY, it seems that there may be some gaps at present, maybe you will say low volatility, when it falls, it is better to fall a little less, and the rate of return does not need to require too much.
But back to before the epidemic, the USMV's rate of return is actually not much less than SPY, reduce the risk of volatility, and the rate of return will not be reduced, which is not what all investors dream of?
Of course, there is no if in the real world, the outbreak is happening, we still let the data speak, according to statistics, the monthly volatility of the USMV is 3%, the annualized volatility is about 10.5%, and the beta value is 0.68, which is quite low compared to the SPY data. But just look at beta, directly 68% of the position to buy SPY, can also achieve a similar effect, so look at another indicator, the market rise to capture the ability to make profits, as the name suggests, the higher the number, the better; and the other is the market downward to capture profitability, representing the market decline in defense, is the lower the better.
If you are more aware of the meaning of beta, it can also be understood that one is an upward beta, the other is a downward beta, the higher the beta may be dominant in the bulls, and the lower the beta in the bears, the better. The proportion of USMV's market rising capture profit is 72.15%, and the downward capture profit ratio is 61.87%, in the vernacular, that is, when the market rises, it will rise a little more, and when it falls, it will fall a little less, which is the value of USMV.
For the relevant data, I believe you have understood, let's look at the ETF itself, the top ten holdings spread out, Microsoft, VISA, Johnson & Johnson, Pepsi, these you should be very familiar with, since it is low volatility, by the way, take a look at their beta value, the first LLY of the shares, It turned out to be only 0.26, which is a large pharmaceutical company and the first company to produce antibiotics, and as for why there is beta 1.09 stock, it is because in addition to focusing on low volatility, USMV also optimizes the portfolio, so it may contain stocks with higher volatility but negative correlation with other investments.
What about the industry distribution? Some low-volatility ETFs, the proportion of public utilities will be slightly higher, but the USMV is different, accounting for only about 7%, and the proportion is a bit similar to the SPY that tracks the S&P 500.
It is worth mentioning that the cost of USMV is also not expensive, only 0.15%. USMV is the same as the Pioneer Broad Cap Index ETF- VTI, the investment scope is the US market, of course, the content is not exactly the same, but for the sake of ease of understanding, you can think of USMV as a low-volatility version of VTI.
So is there a low-volatility version of SPY and the world's vanguard of investment in the world's all-stock market ETF - VT? The answer is yes, we will pick one of the more famous ones to introduce, Invesco has a S&P 500 low volatility ETF, and the US stock code is SPLV. The individual stocks it invests in are more focused on low volatility, which is different from the USMV portfolio, so the beta value of the top ten holdings is slightly compared with the USMV, which is relatively lower.
What about the distribution of industries here? In general, utilities and consumer goods are less affected by the economic cycle, and the fluctuations will be relatively low, with consumer goods accounting for the largest proportion here, about 22%, followed by utilities, accounting for 15%.
Compared with the USMV, both individual stocks and industries have a more low volatility appearance.
So, how does etfight perform? Gloria took the USMV data just now to make a comparison, in addition to beta, it seems that splv is slightly inferior, SPLV is really bad? It depends on what to compare.
Let's take a look at the technical line chart, the blue line is SPLV, the orange line is SPY, before the epidemic, the rate of return and SPY is not much different.
It wasn't until after the pandemic that the two gradually distanced themselves, which is the same as the USMV.
The last one, the global low volatility ETF corresponding to VT investment, is the MSCI global minimum volatility factor ETF issued by BlackRock, the US stock code ACWV, which is the same as VT, investing in stocks around the world, and the volatility is also quite low. But even so, before the pandemic, ACWV's rate of return was not inferior to VT's, just like the two previous ETFs. It was only after the epidemic that the bullet was pulled away.
Three low volatility ETFs, SPLV vs SPY, USMV vs VTI, ACWV vs VT, the performance has a certain level, the above comparison, the same range of stock selection, the tracking index is not consistent, just convenient for us to understand and remember, if you want to know which of the three ETFs is the best, related data, Gloria has been posted on the screen, from the gap between the upper and lower catch rates, it should be USMV, or you as long as the low volatility, other talk free, may pay attention to ACWV.
If you don't like to look at a bunch of numbers, we can change to look at the line chart, the orange line is USMV, the middle light blue line is SPLV, the bottom line is ACWV, the rate of return is just convenient for our reference, for example, the return rate of VT has always been inferior to SPY and VTI, but Gloria always believes that that it does not mean that VT is relatively poor, the rate of return may change due to unexpected events or time changes, for example, low volatility before the epidemic originally did not lose other ETFs, but after the epidemic but because of the rapid rebound and lagging behind.
How the ETF itself is invested and whether it meets your needs is the most important.
Let me make a summary, as mentioned earlier, whether you are thinking of danger in peace, or do not want to bear too much risk, even if the investment novice wants to practice first, you can consider paying attention to the low volatility ETF, although the volatility is reduced, the risk is also reduced, but the preparation should be indispensable, otherwise while reducing the risk, but ignoring the risk, it seems to be a little bit of work to do half, not the feeling of full work.
As for whether the low risk is to catch a high dividend, it depends on personal considerations, but when the ETF has two themes, it is unlikely that they will all do the best, and what is important, you can only rely on yourself to clarify your own needs, and then make a small calculation to measure it.
Regarding the knowledge of ETFs, James, an analyst at Yingli Intelligent Investment, shared that the course will continue to be updated in the future, if you want to know more about the course content, you can also scan ma plus WeChat to get more free courses
