The stock market remains incredibly volatile and one way investors can protect themselves is by investing in quality, well-known businesses that trade at modest valuations. Billionaire investor Warren Buffett believes in investing in great businesses at fair prices; finding bottom-basement bargains isn't necessary in order to find a good stock to buy. It's more important to find a quality business.
You can balance those needs by investing in an exchange-traded fund (ETF) such as the iShares MSCI USA Value Factor ETF (BATS:VLUE). The fund focuses on large and mid-cap U.S. stocks that have low valuations. It contains 150 stocks and the fund averages a price-to-earnings multiple of 9.4.
The bulk of the fund's exposure is to tech stocks, which account for more than 26% of its holdings. Health care is the ETF's next largest sector at 14%, followed by consumer discretionary at 12% and financials at 11%. No other sector accounts for 10%.
And as for specific stocks within the fund, only two make up more than 4% of its weight – AT&T (NYSE:T) and Intel (NASDAQ:INTC). Other notable stocks in the top 10 include Citigroup (NYSE:C), Pfizer (NYSE:PFE), and Ford Motor (NYSE:F).
An attractive feature of the ETF is that its expense ratio is relatively modest at just 0.15%. Many ETFs charge higher management fees and that gives investors some extra incentive to buy VLUE.
Year to date, the fund has declined 13%. That is slightly better than the S&P 500, which is down 15% over the same time frame. But with a focus on value and cheap stocks, the VLUE ETF could set investors up for better gains in the long run.
