iShares MSCI USA Min Vol Factor ETF

USMV

Market cap $23B

In challenging markets, it's best to have some exposure to investments designed to curb portfolio risk. On the equity side, many choose a low volatility ETF for this purpose.

The latest jobs report has put the ETF market into a dilemma. With the unemployment rate rising to 4.4%, the highest level since October 2021, and December rate-cut odds shrinking to 28%, trimming risk and loading up on steadier, low-beta staples may prove to be a prudent move.

iShares MSCI USA Min Vol Factor ETF (USMV) delivered a 30% total return since November 2023, underperforming the S&P 500 but outperforming similar low-volatility funds. USMV's sector tilts and top holdings maintain a defensive profile which should help reduce realized volatility compared to the broader market. The case for defensive equity market exposure has strengthened due to higher market valuations and concentration in broad market indexes.

The iShares MSCI USA Min Vol Factor ETF (USMV) was launched on October 18, 2011, and is a passively managed exchange traded fund designed to offer broad exposure to the Large Cap Blend segment of the US equity market.

With all the AI bubble headlines out there, it's easy to conclude that the great bull run will end in tears and perhaps irrecoverable losses for those who've chased the hottest AI names in the market.

The Invesco S&P 500 High Beta ETF (SPHB) is up a sizzling 27.3% year to date. SPHB targets the stocks in the S&P 500 with the highest sensitivity to market movements, or beta, over the past 12 months.

Looking for broad exposure to the Large Cap Blend segment of the US equity market? You should consider the iShares MSCI USA Min Vol Factor ETF (USMV), a passively managed exchange traded fund launched on October 18, 2011.

Both ACWV and USMV are rated Buy, but I prefer ACWV for its global diversification and defensive qualities in volatile markets. ACWV offers higher dividend yield, lower valuation metrics, and meaningful emerging market exposure, enhancing risk-adjusted returns in uncertain environments. USMV has outperformed due to its tech-heavy U.S. focus, but is more aggressive and less diversified, making it riskier if market conditions worsen.

USMV does achieve lower volatility, or variance, or however you measure variation in the ETF's price, but returns lag possibly disproportionately behind broader market ETFs like IVV over five years. Volatility isn't the same as risk, since a strong positive performance gets recognised as volatility when risk is a negative outcome. But even conceptually, there are plenty of reasons to disagree that risk and volatility are equivalent or even meaningfully associated.

Market turbulence has become a hallmark of today's investing landscape. Against the shifting sands of monetary policy and elevated macro uncertainty, investors are increasingly seeking strategies that offer stability without sacrificing long-term returns.