Dividends4Life: Does Low Risk Sound Boring? Low-Volatility ETFs Can Win

ETF investors willing to take higher risk for higher returns might very well be a little miffed. Dividend- and low-volatility exchange traded funds outperformed in 2014. Despite the robust stock market, momentum and high beta funds lagged in comparison. "Stocks with lower risk characteristics and defensive characteristics generally posted the strongest returns," Nick Kalivas, a senior equity strategist at PowerShares, wrote in a recent article analyzing the effects of equity factors such as momentum and beta on performance.

Queasy ETF investors pumped $674 million into iShares MSCI USA Minimum Volatility (ARCA:USMV) in January. At the same time, investors pulled $72.6 million from iShares Core S&P 500 (ARCA:IVV), which tracks the broad stock market. With $5.7 billion in assets, PowerShares S&P 500 Low Volatility (ARCA:SPLV) is the oldest ETF holding stocks that offer more stable price action. In 2014, SPLV grew its assets 35% to $5.3 billion. The end of the Fed's stimulus program and the drop in oil prices caused volatility to spike in the second half of the year.

Source: Investor's Business Daily

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