iShares recently introduced MSCI USA Minimum Volatility Index Fund (NYSEARCA:USMV). Based on MSCI's description:
The MSCI USA Minimum Volatility Index aims to refl ect the performance characteristics of a minimum variance strategy for the US large and mid cap equity universe. The index is calculated by optimizing the MSCI USA Index, its parent index, for the lowest absolute risk (within a certain set of limits) using an estimated security co-variance matrix. Historically, the index has shown lower beta and volatility characteristics and a bias towards smaller cap stocks and lower idiosyncratic risk relative to the MSCI USA Index.
The index historical performance
|Year||MSCI USA||MSCI USA Min. Vol|
Furthermore, the index offers higher yield (2.97% vs. 2.35%). In the current extremely low interest environment, this ETF can be a good candidate for US stock exposure in an asset allocation portfolio.
Furthermore, the top 10 holdings (as of 10/31/2011) can be good starting points for a risk averse stock investor to form a relatively low risk portfolio:
|ANNALY CAPITAL MANAGEMENT IN||1.70%|
|BRISTOL-MYERS SQUIBB CO||1.70%|
|O'REILLY AUTOMOTIVE INC||1.68%|
|INTL BUSINESS MACHINES CORP||1.65%|
|CONSOLIDATED EDISON INC||1.65%|
|ACCENTURE PLC-CL A||1.65%|
From the holdings, one can see most of them are blue chip companies with stable cash flow.
Disclaimer: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.