SPY - SPLV: Think Twice Before You Buy This Low Volatility ETF
2024-05-22 17:59:47 ET
Summary
- SPLV is one of the most established U.S. large-cap low-volatility ETFs on the market. It has a moderate 0.25% expense and $7.10 billion in assets under management.
- The ETF appeals to risk-averse investors by selecting the 100 least-volatile S&P 500 Index stocks each quarter. Currently, SPLV overweights Financials, Consumer Staples, and Industrials.
- SPLV's current portfolio has a 0.75 five-year beta, the eighth-lowest among all large-cap blend ETFs. Unfortunately, it lacks appropriate quality, leaving investors vulnerable in "flight to safety" environments.
- As a result, I've assigned SPLV a neutral "hold" rating, and will highlight a higher-quality alternative I think you should consider.
Investment Thesis
On October 7, 2023, I recommended that readers avoid the Invesco S&P 500 Low Volatility ETF ( SPLV ) and suggested that the iShares MSCI USA Min Vol Factor ETF ( USMV ) was a suitable alternative. Since that article was published, SPLV has lagged behind USMV by 2.24% (14.60% vs. 16.84%) on total returns, continuing its lengthy streak of underperforming its peers. While past performance does not predict future results, SPLV's track record suggests potential problems with the strategy....
SPLV: Think Twice Before You Buy This Low Volatility ETF