The Invesco S&P 500 Low Volatility ETF (NYSE Arca:SPLV) presents a compelling exchange-traded fund (ETF) for investors heading into the new year, who prioritize capital preservation and safety. While the fund has posted a modest gain of around 3% for the year, this performance underscores its defensive nature in a market environment that has likely been characterized by rotation or uncertainty.
Rather than chasing the highest flyers, which often come with significant downside risk, SPLV tracks the 100 stocks within the S&P 500 index that have exhibited the lowest realized volatility over the past year. This approach removes emotion from the selection process and naturally tilts the portfolio toward resilient sectors, ensuring that investors can stay invested in equities without enduring the risk that comes with many high-priced growth stocks.
Looking at the longer-term picture, the ETF has proven its ability to build wealth steadily, having risen by 29% over the past five years. The total return is further supported by a dividend yield of right around 2%. In an environment where interest rates and inflation are constant concerns, this steady income stream acts as a financial cushion, helping to offset minor price fluctuations and contributing to the compounding of wealth over time.
And with an expense ratio of just 0.25%, the ETF is relatively inexpensive to own, meaning that a larger portion of the gross returns ends up in the shareholder's pocket. When combined with the fund's strategy of minimizing drawdowns, this low-cost structure makes it an efficient vehicle for long-term investing.
