Self Directed Investor Inc
SDI: "Empowering investors with ideas and education"
Symbol Lookup »  
Topics:ChinaETFsEarningsEconomyEnergyForexGoldIncomeLessonsIdeasTrading

  • Other news: News from PR Newswire
| More

5 ETF Strategies To Reign In Risk

Fri, Nov 16, 9:16 AM ET, by Michael Johnston

As we barrel towards the Niagara Falls of all fiscal cliffs, investors seem fairly certain that additional volatility is in store for the next few months. What is less clear, however, are the strategies that can be effective in insulating portfolios from a surge in uncertainty-related volatility over the next several weeks [see also Free Report: How To Pick The Right ETF Every Time].

Inspired by some of the thoughts put together by the folks at iShares, we outline five strategies below for reducing overall risk and volatility in your portfolio, as well as some specific ETF options for each approach.

  1. Low Volatility Stocks: This approach is perhaps stunningly obvious, but it’s worth highlighting given the innovations in the ETF industry in recent months that make implementation easier than ever. For investors expecting a rise in volatility and significant downside risk, low volatility stocks represent a way to scale back overall risk while still keeping skin in the game (ie, keeping overall equity exposure the same). There are a number of low volatility ETFs out there now; the PowerShares S&P 500 Low Volatility Portfolio (SPLV, A) is by far the most popular, but there are other options targeting developed and international markets outside the U.S [see our Low Volatility ETFdb Portfolio].
  2. Mega Cap Stocks: Another option for investors looking to scale back risk while maintaining their existing equity allocation is mega cap stocks. While these companies aren’t immune to uncertainty and volatility, they tend to exhibit greater stability than smaller companies. Because they generally have established operations and significant cash balances, mega caps can be a way to reduce overall volatility. Again, there are a number of mega cap ETF options here; funds such as OEF and MGK tap the U.S. market, while FEZ, IOO, DGT, and ADRE focus on international mega cap stocks.
  3. Hedge Fund Strategies: The idea of a hedge fund strategy might seem contradictory to risk reduction, but that relates to misconceptions about what hedge fund replication really seeks to achieve. The goal is not a risk on, shoot-for-the stars approach, but rather an attempt to reduce overall volatility and achieve returns that exhibit low correlation to stocks and bonds. Comparing the overall volatility of a product like the IQ Hedge Multi-Strategy Tracker ETF (QAI) to SPY, for example, illustrates this point quite effectively. There are a number of hedge fund ETFs that offer relatively low volatility, making this alternative strategy potentially very appealing now [see Cheapskate Hedge Fund ETFdb Portfolio].
  4. Precious Metals: The gold bugs may have their day yet; after slogging along for most of the year, precious metals prices have popped since the election. That could be a good indication that hard assets–specifically gold and silver–will be the primary beneficiaries of any prolonged gridlock in Washington. There are a number of ETFs offering exposure to both gold and silver, as well as several broad-based precious metals funds.
  5. Cash: This represents the ultimate capital preservation approach–which isn’t necessarily a bad tactic in the current environment. Converting to cash or cash equivalents obviously minimizes the upside–especially with rates near zero–but takes almost all the risk off the table along with it. Before rushing to put your money under the mattress, consider one of the several money market ETFs that offers modest yield opportunities.

Disclosure: No positions at time of writing.


SDI Glossary: "ADR" Definition
SDI Glossary: "Cash" Definition
SDI Glossary: "price" Definition
SDI Glossary: "ETFs" Definition
SDI Glossary: "iShares" Definition
SDI Glossary: "Stock" Definition
This Article's Word Cloud:   ETFdb   ETFs   Hedge   Portfolio   Stocks   There   This   Volatility   achieve   along   approach   back   cash   companies   exhibit   fund   funds   gold   have   hedge   international   investors   keeping   market   mega   money   months   next   number   options   overall   precious   reduce   risk   scale   seem   several   significant   silver   stocks   strategies   that   their   there   they   uncertainty   volatility   well   while   your

| More

Textron Moves Up In Analyst Rankings, Passing Marsh & McLennan Companies
Thu, Dec 18, 11:54 AM ET, by ETF Channel

In a study of analyst recommendations at the major brokerages, for the underlying components of ...

VEU, RY, VOD, TSM: ETF Inflow Alert
Thu, Dec 18, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: VEU, RY, VOD, TSM Exchange traded funds (ETFs) trade just ...

Daily Small Cap Bear 3x Shares Experiences Big Outflow
Thu, Dec 18, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: TZA Exchange traded funds (ETFs) trade just like stocks, but ...

XLB, DD, MON, DOW: Large Outflows Detected at ETF
Thu, Dec 18, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: XLB, DD, MON, DOW Exchange traded funds (ETFs) trade just ...

Insiders Buy the Holdings of XSLV ETF
Thu, Dec 18, 9:34 AM ET, by ETF Channel

A look at the weighted underlying holdings of the PowerShares S&P SmallCap Low Volatility Portfolio ...

16.4% of QABA Holdings Seeing Recent Insider Buys
Thu, Dec 18, 9:34 AM ET, by ETF Channel

A look at the weighted underlying holdings of the First Trust NASDAQ ABA Community Bank ...

EQR Named A Top Socially Responsible Dividend Stock
Thu, Dec 18, 9:14 AM ET, by ETF Channel

Equity Residential (EQR) has been named a Top Socially Responsible Dividend Stock by Dividend Channel, ...

GE a Top 25 Dividend Giant With $8.66B Held By ETFs
Thu, Dec 18, 9:14 AM ET, by ETF Channel

General Electric Co (GE) has been named as a Top 25 ''Dividend Giant'' by ETF ...

Shares of GSY Now Oversold
Wed, Dec 17, 4:14 PM ET, by ETF Channel

In trading on Wednesday, shares of the Guggenheim Enhanced Short Duration ETF (GSY) entered into ...

PowerShares Preferred Portfolio (PGX) Shares Cross Above 200 DMA
Wed, Dec 17, 4:14 PM ET, by ETF Channel

In trading on Wednesday, shares of the PowerShares Preferred Portfolio ETF (PGX) crossed above their ...

QEP Resources Moves Up In Analyst Rankings, Passing Eastman Chemical
Wed, Dec 17, 11:54 AM ET, by ETF Channel

In a study of analyst recommendations at the major brokerages, for the underlying components of ...

iShares MSCI Taiwan (EWT) Enters Oversold Territory
Wed, Dec 17, 11:14 AM ET, by ETF Channel

In trading on Wednesday, shares of the iShares MSCI Taiwan ETF (EWT) entered into oversold ...

iShares 20+ Year Treasury Bond ETF Experiences Big Inflow
Wed, Dec 17, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: TLT Exchange traded funds (ETFs) trade just like stocks, but ...

ProShares Ultra MidCap400 Experiences Big Outflow
Wed, Dec 17, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: MVV, DDD, AAN, ANF Exchange traded funds (ETFs) trade just ...

PowerShares Variable Rate Preferred Portfolio Getting Very Oversold
Wed, Dec 17, 10:54 AM ET, by ETF Channel

In trading on Wednesday, shares of the PowerShares Variable Rate Preferred Portfolio ETF (VRP) entered ...

CHIQ Crowded With Sellers
Wed, Dec 17, 10:54 AM ET, by ETF Channel

In trading on Wednesday, shares of the China Consumer ETF (CHIQ) entered into oversold territory, ...

First Trust Preferred Securities and Income Getting Very Oversold
Wed, Dec 17, 10:54 AM ET, by ETF Channel

In trading on Wednesday, shares of the First Trust Preferred Securities and Income ETF (FPE) ...

Why Procter & Gamble is a Top 25 Dividend Giant (PG)
Wed, Dec 17, 9:44 AM ET, by ETF Channel

Procter & Gamble Co. (PG) has been named as a Top 25 ''Dividend Giant'' by ...

Bullish Two Hundred Day Moving Average Cross - JKI
Tue, Dec 16, 4:24 PM ET, by ETF Channel

In trading on Tuesday, shares of the iShares Morningstar Mid-Cap Value ETF (JKI) crossed above ...

GURU Crosses Critical Technical Indicator
Tue, Dec 16, 3:54 PM ET, by ETF Channel

In trading on Tuesday, shares of the Guru Index ETF (GURU) entered into oversold territory, ...

Starbucks Moves Up In Analyst Rankings, Passing Mylan
Tue, Dec 16, 11:54 AM ET, by ETF Channel

In a study of analyst recommendations at the major brokerages, for the underlying components of ...

iShares MSCI Poland Capped (EPOL) Enters Oversold Territory
Tue, Dec 16, 11:14 AM ET, by ETF Channel

In trading on Tuesday, shares of the iShares MSCI Poland Capped ETF (EPOL) entered into ...

Shares of EWD Now Oversold
Tue, Dec 16, 11:14 AM ET, by ETF Channel

In trading on Tuesday, shares of the iShares MSCI Sweden ETF (EWD) entered into oversold ...

INDY Makes Notable Cross Below Critical Moving Average
Tue, Dec 16, 11:14 AM ET, by ETF Channel

In trading on Tuesday, shares of the iShares India 50 ETF (INDY) crossed below their ...

Treasury-Hedged High Yield Bond (THHY) Enters Oversold Territory
Tue, Dec 16, 11:14 AM ET, by ETF Channel

In trading on Tuesday, shares of the Treasury-Hedged High Yield Bond ETF (THHY) entered into ...

GMF Crowded With Sellers
Tue, Dec 16, 11:14 AM ET, by ETF Channel

In trading on Tuesday, shares of the SPDR S&P Emerging Asia Pacific ETF (GMF) entered ...

VOO, GE, WFC, BRK.B: Large Inflows Detected at ETF
Tue, Dec 16, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: VOO, GE, WFC, BRK.B Exchange traded funds (ETFs) trade just ...

iShares iBoxx $ High Yield Corporate Bond ETF Experiences Big Outflow
Tue, Dec 16, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: HYG Exchange traded funds (ETFs) trade just like stocks, but ...

11.1% of XBI Holdings Seeing Recent Insider Buys
Tue, Dec 16, 9:44 AM ET, by ETF Channel

A look at the weighted underlying holdings of the SPDR S&P Biotech ETF (XBI) shows ...

KO a Top 25 Dividend Giant With $7.78B Held By ETFs
Tue, Dec 16, 8:14 AM ET, by ETF Channel

Coca-Cola Co (KO) has been named as a Top 25 ''Dividend Giant'' by ETF Channel, ...

Boston Properties a Top Socially Responsible Dividend Stock With 2.0% Yield (BXP)
Tue, Dec 16, 8:14 AM ET, by ETF Channel

Boston Properties, Inc. (BXP) has been named a Top Socially Responsible Dividend Stock by Dividend ...

URTH Crowded With Sellers
Mon, Dec 15, 4:34 PM ET, by ETF Channel

In trading on Monday, shares of the iShares MSCI World ETF (URTH) entered into oversold ...

Brazil Financials (BRAF) Enters Oversold Territory
Mon, Dec 15, 4:34 PM ET, by ETF Channel

In trading on Monday, shares of the Brazil Financials ETF (BRAF) entered into oversold territory, ...

DSUM Crosses Critical Technical Indicator
Mon, Dec 15, 4:34 PM ET, by ETF Channel

In trading on Monday, shares of the PowerShares Chinese Yuan Dim Sum Bond Portfolio ETF ...

EGPT Crosses Critical Technical Indicator
Mon, Dec 15, 4:34 PM ET, by ETF Channel

In trading on Monday, shares of the Egypt Index ETF (EGPT) entered into oversold territory, ...

IPU Crowded With Sellers
Mon, Dec 15, 4:34 PM ET, by ETF Channel

In trading on Monday, shares of the SPDR S&P International Utilities Sector ETF (IPU) entered ...

ACIM Crowded With Sellers
Mon, Dec 15, 4:34 PM ET, by ETF Channel

In trading on Monday, shares of the SPDR MSCI ACWI IMI ETF (ACIM) entered into ...

BRAZ Crosses Critical Technical Indicator
Mon, Dec 15, 4:34 PM ET, by ETF Channel

In trading on Monday, shares of the Brazil Mid Cap ETF (BRAZ) entered into oversold ...

NFO Makes Notable Cross Below Critical Moving Average
Mon, Dec 15, 4:24 PM ET, by ETF Channel

In trading on Monday, shares of the Guggenheim Insider Sentiment ETF (NFO) crossed below their ...

MIDU Makes Notable Cross Below Critical Moving Average
Mon, Dec 15, 4:24 PM ET, by ETF Channel

In trading on Monday, shares of the Daily Mid Cap Bull 3x Shares ETF (MIDU) ...

PGF Makes Notable Cross Below Critical Moving Average
Mon, Dec 15, 4:14 PM ET, by ETF Channel

In trading on Monday, shares of the PowerShares Financial Preferred Portfolio ETF (PGF) crossed below ...

JKJ Makes Notable Cross Below Critical Moving Average
Mon, Dec 15, 4:14 PM ET, by ETF Channel

In trading on Monday, shares of the iShares Morningstar Small-Cap ETF (JKJ) crossed below their ...

First Trust North American Energy Infrastructure Fund Breaks Below 200-Day Moving Average - Notable for EMLP
Mon, Dec 15, 4:14 PM ET, by ETF Channel

In trading on Monday, shares of the First Trust North American Energy Infrastructure Fund ETF ...

INDA Crosses Below Key Moving Average Level
Mon, Dec 15, 4:14 PM ET, by ETF Channel

In trading on Monday, shares of the iShares MSCI India ETF (INDA) crossed below their ...

VXF Makes Notable Cross Below Critical Moving Average
Mon, Dec 15, 4:14 PM ET, by ETF Channel

In trading on Monday, shares of the Vanguard Extended Market ETF (VXF) crossed below their ...

VB Crosses Below Key Moving Average Level
Mon, Dec 15, 4:14 PM ET, by ETF Channel

In trading on Monday, shares of the Vanguard Small-Cap ETF (VB) crossed below their 200 ...

EXI Crosses Critical Technical Indicator
Mon, Dec 15, 3:55 PM ET, by ETF Channel

In trading on Monday, shares of the iShares Global Industrials ETF (EXI) entered into oversold ...

EWQ Crosses Critical Technical Indicator
Mon, Dec 15, 3:55 PM ET, by ETF Channel

In trading on Monday, shares of the iShares MSCI France ETF (EWQ) entered into oversold ...

JKF Crowded With Sellers
Mon, Dec 15, 3:55 PM ET, by ETF Channel

In trading on Monday, shares of the iShares Morningstar Large-Cap Value ETF (JKF) entered into ...

Shares of IOO Now Oversold
Mon, Dec 15, 3:55 PM ET, by ETF Channel

In trading on Monday, shares of the iShares Global 100 ETF (IOO) entered into oversold ...

Related videos | all videos »
  More articles:  1 2 3 4 5 6 7 next »

ABOUT US »   ADVERTISE »   CONTACT US »   TERMS OF USE & PRIVACY POLICY »

5 ETF Strategies To Reign In Risk | Self Directed Investor | Copyright © 2008 - 2014, All Rights Reserved

Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

SDI is associated with: ValueForum.com -- a subscription-based online social networking forum of over 1000 individual investors. | MarketNewsVideo.com -- videos appearing on SDI are produced by Market News Video. | TickerTech.com -- stock quote content appearing on SDI is at least 20 minutes delayed and is powered by Ticker Technologies. | GoldStockStrategist.com -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.