6 Nutritious ETFs To Consider On World Health Day

On World Health Day, we would like to draw investors’ attention to well-nourished ETFs that can immune a portfolio from market volatility that is so rampant now. Just like we need nutrients to lead a healthy life, given below are what an ETF portfolio needs to be in the pink.

Quality

Quality ETFs are generally rich on value characteristics as they focus on stocks with high quality scores based on three fundamentals – high return on equity, stable earnings growth and low financial leverage. This approach seeks investments in safer stocks and reduces volatility when compared to plain vanilla funds. Academic research shows that high quality companies consistently deliver superior risk-adjusted returns than the broader market over the long term. More importantly, these stocks generally outperform in a crumbling market (read: How to Play the Choppy Market with Cheap Smart Beta ETFs).
 
While there are several quality ETFs available in the space, MSCI USA Quality Factor ETF (QUAL – ETF report) seems to be the most popular. This fund provides exposure to the stocks exhibiting positive fundamentals (high return on equity, stable year-over-year earnings growth, and low financial leverage) by tracking the MSCI USA Sector Neutral Quality Index. In total, the fund holds 123 securities in its basket, which are pretty spread across a number of securities with none holding more than 5.03% of assets.

From a sector look, information technology takes the top spot at 20.5%, followed by financials (16.0%), healthcare (14.5%) and consumer discretionary (14.2%). The product has amassed $2.3 billion in its asset base and charges just 15 bps in annual fees from investors. Average trading volume is good at around 317,000 shares per day. The fund has returned nearly 36.7% to date since its inception in July 2013.

Low Volatility

Low volatility products appear safe in a turbulent market, and reduce losses in declining markets. But these generate decent returns when markets rise. This is because these funds include more stable stocks that have experienced the least price movement in their portfolio. Further, these funds contain stocks of defensive sectors, which usually have a higher distribution yield than the broader markets (read: Low Volatility ETFs Still in Play).
 
In particular, the ultra-popular iShares MSCI USA Minimum Volatility ETF (USMV – ETF report) having AUM of $11.4 billion and average daily volume ofabout 3 million shares, tracks the MSCI USA Minimum Volatility (USD) Index. It offers exposure to 168 U.S. stocks having lower volatility characteristics than the broader U.S. equity market. The fund is well spread across a number of components with each holding less than 1.71% share. From a sector look, financials, healthcare, information technology and consumer staples occupy the top positions with double-digit exposure each. Expense ratio comes in at 0.15%. The fund has delivered returns of 44.1% over the trailing five-year period.

Low Beta

Low beta ETFs exhibit greater levels of stability than their market-sensitive counterparts and will usually lose less when the market is crumbling. Though these have lesser risks and lower returns, the funds are considered safe and resilient amid uncertainty. However, when markets soar, these low beta funds experience lesser gains than the broader market counterparts but are still considered healthy. PowerShares Russell 1000 Low Beta Equal Weight Portfolio (USLB – ETF report) could be a solid pick.