3 Low Volatility ETFs to Buy for a Market Downturn

U.S. stocks declined sharply on the first trading day of this week on concerns over rising COVID-19 cases worldwide caused primarily by the Delta variant of COVID-19. While the broader market has since recovered, slowing economic growth could sustain market bearishness in the near term.

On July 19, the 10-year Treasury yield saw its biggest one-day drop since March 23, 2020, reflecting concerns over global economic growth. Furthermore, according to a Reuters article, in recent weeks hedges against a big market drop have increased in the options market, indicating investors are fearful of a market correction.

So, as we approach late summer, which, historically, has been known for market volatility, it could be wise to bet on low-volatility ETFs now. We think the low beta values of iShares MSCI USA Min Vol Factor ETF (USMV), Invesco S&P 500 Low Volatility ETF (SPLV), and Legg Mason Low Volatility High Dividend ETF (LVHD) make them ideal picks now.

iShares MSCI USA Min Vol Factor ETF (USMV)

This ETF seeks to track the investment results of the MSCI USA Minimum Volatility (USD) index, which consists of U.S. equities with  lower-volatility characteristics relative to the broader U.S. equity market. It invests at least 90% of its assets in the index's component securities and may invest up to 10% of its assets in certain futures, options and swap contracts, cash and cash equivalents. USMV has $28.09 billion in assets under management. The ETF’s major holdings include Eli Lilly and Company (LLY), Microsoft Corporation (MSFT), and Accenture plc (ACN).

USMV has a 0.15%  expense ratio, which is lower than the 0.37% category average. It also has an MSCI ESG Fund Rating of A. The ETF distributes $1.10 in dividends annually, which translates to a dividend yield of 1.46%. Its four-year average dividend yield is 1.92%. USMV has a 0.75 beta.

The fund has gained 19.4% over the past year and 10.8% over the past six months. USMV is currently trading at $75.47, which is 24.9% above its 52-week low of $60.23.

USMV’s POWR Ratings reflect this promising outlook. The ETF has an overall A grade,  which equates to a Strong Buy rating in our proprietary rating system.

USMV also has an A for Trade Grade and Buy & Hold Grade. Click here to see more of USMV’s component grades. Of the 261 ETFs in the A-rated Large Cap Blend ETFs group, USMV is ranked #9.

Invesco S&P 500 Low Volatility ETF (SPLV)

SPLV seeks to track the investment results of the 100 stocks in the S&P 500 Low Volatility Index with the lowest daily volatility over the past year. The fund generally invests at least 90% of its total assets in securities  across diversified sectors that comprise the underlying index. SPLV has $7.95 billion in assets under management. The ETF’s major holdings include Costco Wholesale Corporation (COST), PepsiCo, Inc. (PEP), and Procter & Gamble Company (PG).

SPLV has a 0.25% expense ratio, which is lower than the 0.65% category average. It also has an MSCI ESG Fund Rating of A. The ETF distributes $0.97 in dividends annually, which translates to a 1.55% dividend yield. Its four-year average dividend yield is 2.13%. It has a 0.70 beta.

SPLV has gained 18.6% over the past year and 10.5% over the past six months. The ETF is currently trading at $62.39, which is 22.5% higher than its 52-week low of $50.95.

SPLV’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall A rating, which equates to Strong Buy in our proprietary rating system.

SPLV has an A  Trade Grade and Buy & Hold Grade. We have also graded SPLV for Peer grade. Click here to access all SPLV’s ratings. SPLV is ranked #13 of 84 ETFs in the A-rated Large Cap Value ETFs group.

Legg Mason Low Volatility High Dividend ETF (LVHD)

LVHD seeks to track the investment results of the QS Low Volatility High Dividend Index, which consists of profitable U.S. companies with stable dividend payouts, low price, and earnings volatility. The fund will invest at least 80% of its net assets, plus borrowings for investment purposes, if any, in securities that comprise the index. LVHD has $751.80 million in assets under management. The ETF’s major holdings include Eaton Corporation plc (ETN), Emerson Electric Company (EMR), and The Kroger Company (KR).

LVHD has a 0.27%  expense ratio, which is lower than the 0.65% category average. It also has an MSCI ESG Fund Rating of A. The ETF distributes $1.08 in dividends annually, which translates to a 2.93% dividend yield. Its four-year average dividend yield is 3.48%. It has a beta of 0.82.

LVHD is currently trading at $36.79, which is 32.3% above its 52-week low of $27.81. The ETF has gained 24.1% over the past year and 12.6% over the past six months.

It’s no surprise that LVHD has an overall A rating, which equates to Strong Buy in our proprietary rating system.

The ETF also has an A for Trade Grade and Buy & Hold Grade. To see more of LVHD’s POWR Ratings, click here. LVHD is ranked #7 of 155 ETFs in the B-rated All Cap Equities ETFs group.