iShares MSCI USA Minimum Volatility ETF (USMV)
USMV (Click to Enlarge) Another ETF that has long been a favorite of mine for reducing draw down is the iShares MSCI USA Minimum Volatility ETF (USMV). This fund provides exposure to 139 large and mid-cap stocks in the United States that are selected based on a screen of the lowest price fluctuations among their peers. This strategy essentially seeks to minimize the peaks and valleys associated with traditional stock market indices.
The top sector weightings in USMV include healthcare, consumer staples, and technology firms. This portfolio mix has helped push USMV to a gain of 3% so far in 2014, and as you can see on the chart the uptrend is still firmly intact.
Another advantage of this strategy is the rock-bottom expense ratio of just 0.15% that makes this ETF perfect for a core equity holding. The one drawback of USMV is that you won’t experience as much upside in a rapidly rising environment; however, conservative investors may be willing to forego that opportunity to mitigate downside risk.