Low-volatility ETFs have beaten S&P indexes while cutting risk

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Beliavsky
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Low-volatility ETFs have beaten S&P indexes while cutting risk

Post by Beliavsky » Fri Jan 11, 2019 12:21 pm

Using Portfolio Visualizer I have found that USMV (iShares Edge MSCI Min Vol USA ETF) works even better than SPLV (Invesco S&P 500 Low Volatility ETF).

These three ETFs have beaten S&P indexes while cutting risk
by Philip van Doorn
Market Watch
Published: Jan 11, 2019 9:38 a.m. ET

...

S&P Dow Jones Indices also developed low-volatility versions of the broad indexes. The S&P 500 Low Volatility Index includes the 100 S&P 500 stocks that have had the lowest price volatility over the previous 12 months. It is rebalanced quarterly. There are similar low-volatility indexes for the S&P 400 Mid-Cap Index and the S&P Small-Cap 600 Index.

...

The S&P 500 Low Volatility Index “tends to capture about 75% of the up of the [full] index and about 50% of the downside” over long periods, Invesco senior ETF equity strategist Nick Kalivas said in an interview Jan. 10.

...

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hdas
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Re: Low-volatility ETFs have beaten S&P indexes while cutting risk

Post by hdas » Fri Jan 11, 2019 12:23 pm

Yes, go ahead and pile on at the worst possible time. :twisted: :greedy
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

actx
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Re: Low-volatility ETFs have beaten S&P indexes while cutting risk

Post by actx » Fri Jan 11, 2019 12:26 pm

Similar but different. . .this post and related article:

https://theirrelevantinvestor.com/2019/ ... -20-years/


"There was an article in Barron’s over the weekend, It’s Been a Rough 20 Years for Stocks. The Next 20 Should Be a Lot Better. The first part of that headline is factually correct. From 1999-2018, the stock market experienced two crashes, and investors received just 5.6% annually for their troubles. Over the same time, the Barclays aggregate bond index gained 4.6% and experienced a max drawdown of less than 5%."

emphasis mine.

columbia
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Re: Low-volatility ETFs have beaten S&P indexes while cutting risk

Post by columbia » Fri Jan 11, 2019 6:11 pm

USMV holds almost 24% LT treasuries.

I do not consider this ETF to be “similar” to the S&P 500.

gtwhitegold
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Re: Low-volatility ETFs have beaten S&P indexes while cutting risk

Post by gtwhitegold » Fri Jan 11, 2019 6:20 pm

columbia wrote:
Fri Jan 11, 2019 6:11 pm
USMV holds almost 24% LT treasuries.

I do not consider this ETF to be “similar” to the S&P 500.
Where do you see that? Top 10 holdings for USMV are all equities on Morningstar.com.

alex_686
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Re: Low-volatility ETFs have beaten S&P indexes while cutting risk

Post by alex_686 » Fri Jan 11, 2019 9:45 pm

hdas wrote:
Fri Jan 11, 2019 12:23 pm
Yes, go ahead and pile on at the worst possible time. :twisted: :greedy
Why would you say this was the worst possible time?

HEDGEFUNDIE
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Re: Low-volatility ETFs have beaten S&P indexes while cutting risk

Post by HEDGEFUNDIE » Fri Jan 11, 2019 9:51 pm

alex_686 wrote:
Fri Jan 11, 2019 9:45 pm
hdas wrote:
Fri Jan 11, 2019 12:23 pm
Yes, go ahead and pile on at the worst possible time. :twisted: :greedy
Why would you say this was the worst possible time?
The “normal vol” funds are all at cycle lows. Selling them now to move to a low vol fund locks in your losses and you won’t benefit from volatility to get you back to even.

columbia
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Re: Low-volatility ETFs have beaten S&P indexes while cutting risk

Post by columbia » Fri Jan 11, 2019 9:51 pm

gtwhitegold wrote:
Fri Jan 11, 2019 6:20 pm
columbia wrote:
Fri Jan 11, 2019 6:11 pm
USMV holds almost 24% LT treasuries.

I do not consider this ETF to be “similar” to the S&P 500.
Where do you see that? Top 10 holdings for USMV are all equities on Morningstar.com.

Per Portfolio Visualizer.
Given your response, I presume that their metric data is quite incorrect; odd.

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Horton
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Re: Low-volatility ETFs have beaten S&P indexes while cutting risk

Post by Horton » Fri Jan 11, 2019 9:52 pm

alex_686 wrote:
Fri Jan 11, 2019 9:45 pm
hdas wrote:
Fri Jan 11, 2019 12:23 pm
Yes, go ahead and pile on at the worst possible time. :twisted: :greedy
Why would you say this was the worst possible time?
Very simply - you may be buying high.
"You must know that there is nothing higher and stronger and more wholesome and good for life in the future than some good memory, especially a memory of childhood, of home." - Dostoyevsky

StrangePenguin
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Re: Low-volatility ETFs have beaten S&P indexes while cutting risk

Post by StrangePenguin » Fri Jan 11, 2019 10:59 pm

columbia wrote:
Fri Jan 11, 2019 6:11 pm
USMV holds almost 24% LT treasuries.

I do not consider this ETF to be “similar” to the S&P 500.
Just to get the facts straight, here is the source: https://www.ishares.com/us/products/239 ... tility-etf
I see no evidence that USMV holds anything other than stocks (and 1 or 2% of cash, which is normal).

From the summary prospectus: "index composed of U.S. equities"...

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hdas
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Re: Low-volatility ETFs have beaten S&P indexes while cutting risk

Post by hdas » Sat Jan 12, 2019 8:03 am

HEDGEFUNDIE wrote:
Fri Jan 11, 2019 9:51 pm
alex_686 wrote:
Fri Jan 11, 2019 9:45 pm
hdas wrote:
Fri Jan 11, 2019 12:23 pm
Yes, go ahead and pile on at the worst possible time. :twisted: :greedy
Why would you say this was the worst possible time?
The “normal vol” funds are all at cycle lows. Selling them now to move to a low vol fund locks in your losses and you won’t benefit from volatility to get you back to even.
Yes Mr. Hedgefundie, glad you got the msg, so far my advice has netted you 3-5%. You’re welcome. :beer
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

Topic Author
Beliavsky
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Re: Low-volatility ETFs have beaten S&P indexes while cutting risk

Post by Beliavsky » Sat Jan 12, 2019 8:29 pm

gtwhitegold wrote:
Fri Jan 11, 2019 6:20 pm
columbia wrote:
Fri Jan 11, 2019 6:11 pm
USMV holds almost 24% LT treasuries.

I do not consider this ETF to be “similar” to the S&P 500.
Where do you see that? Top 10 holdings for USMV are all equities on Morningstar.com.
Maybe he regressed USMV returns on the returns of a proxy for LT treasury returns and got a 0.24 coefficient. I have read that low-vol stocks have more exposure to interest rates than stocks in general. But USMV does not directly own bonds.

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arcticpineapplecorp.
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Re: Low-volatility ETFs have beaten S&P indexes while cutting risk

Post by arcticpineapplecorp. » Sat Jan 12, 2019 10:08 pm

actx wrote:
Fri Jan 11, 2019 12:26 pm
Similar but different. . .this post and related article:

https://theirrelevantinvestor.com/2019/ ... -20-years/


"There was an article in Barron’s over the weekend, It’s Been a Rough 20 Years for Stocks. The Next 20 Should Be a Lot Better. The first part of that headline is factually correct. From 1999-2018, the stock market experienced two crashes, and investors received just 5.6% annually for their troubles. Over the same time, the Barclays aggregate bond index gained 4.6% and experienced a max drawdown of less than 5%."

emphasis mine.
Yeah, that picture below doesn't look so good for the total stock market index fund (in blue) compared to the total bond market index fund (in orange) over the past 20 years:

Image

source: https://quotes.morningstar.com/chart/fu ... A%5B%5D%7D

Thing is, didn't the stock market represent some good buying opportunities every time it fell? And buying then would have produced returns better than just looking at the overall buy and hold (as if you bought in 1999 and never bought again for 20 years). How many just buy and hold for 20 years and never add more during that time?
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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