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The Low-Cost and Low-Volatility Fund That Is Beating the Market This Year
When you think of a low-volatility investment, odds are, you aren’t expecting it to generate big returns. But at a time when investors are putting more money into safe stocks, it’s those kinds of investments which are generating stronger-than-usual returns right now. Utilities, for example, are intriguing investment options nowadays due to the stability they offer in the long run. Plus, they are also good dividend plays.
One exchange-traded fund (ETF) which focuses on utility stocks is the Utilities Select Sector SPDR Fund (NYSE Arca:XLU). It has a five-year beta value of 0.75, which means that its moves are less volatile than that of the broader market. It’s a good safe investment to buy and hold. And it also pays a yield of around 2.9%, which gives investors a reason to just hold on to the investment for the long term.
As the name suggests, you’ll be getting exposure to utility stocks – specifically, those which are in the S&P 500 index. This means that you aren’t getting small, unknown or otherwise risky stocks with the fund. Among the top names in the fund include NextEra Energy (NYSE:NEE), Southern Company (NYSE:SO), and Duke Energy (NYSE:DUK). Those three stocks make up around 30% of the ETF’s total holdings.
There are 31 stocks in the fund which may not seem overly diverse but with a focus on the top utility stocks in the S&P 500, that may not necessarily be a bad thing for investors. The fund charges a low expense ratio of just 0.09%. And despite the safety it offers, it has been beating the markets this year, rising by 24% while the S&P 500 is up by around 18%. If you’re looking for a safe ETF to hold, this could be it.
