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Position Defensively With SPLV to Safeguard Gains

Investors can position their portfolios more defensively to safeguard the gains achieved year to date.

The economic outlook for the duration of 2023 and beyond remains uncertain. As broad indexes have rallied year to date, some investors may want to consider adding a defensive strategy such as the Invesco S&P 500 Low Volatility ETF (SPLV) to protect returns if volatility increases.

“Many advisors are mindful of the strong market gains in 2023 and yet have concerns about the rest of the year,” Todd Rosenbluth, head of research at VettaFi, said. “A lower volatility approach like SPLV can keep them invested in large-cap stocks but with a focus on the more defensive stocks. The less risky stocks might not climb as high if gains continue but can provide protection if a pullback occurs.”

SPLV is a useful tool for achieving more stability in portfolios to avoid big daily moves. The fund is based on the S&P 500 Low Volatility Index, which consists of the 100 securities from the S&P 500 Index with the lowest realized volatility over the past 12 months. Over 90% of SPLV’s underlying index by weight is in the consumer staples, utilities, health care, financials, and industrials sectors.

See more: “OMFL, SPLV Lead in Investor Interest Across Invesco ETFs

Under the Hood of SPLV

As overall volatility in the market has declined in the past few months, SPLV has rebalanced accordingly. Following the fund’s August rebalance, SPLV now tilts more heavily toward the consumer staples sector, the largest sector by weight in the fund. Meanwhile, utilities saw the greatest decline in weight, losing 2.9% in SPLV’s underlying index, according to S&P Dow Jones Indices.

Notably, the energy and materials sectors are not represented in SPLV’s underlying index.

In addition to SPLV, Invesco’s low volatility suite comprises the Invesco S&P MidCap Low Volatility ETF (XMLV), the Invesco S&P SmallCap Low Volatility ETF (XSLV), the Invesco S&P International Developed Low Volatility ETF (IDLV), and the Invesco S&P Emerging Markets Low Volatility ETF (EELV).

For more news, information, and analysis, visit the Innovative ETFs Channel.

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