Posted on 05/14/2012
On Friday, we looked at a number of exchange-traded products that provide high yield and/or low volatlity. If we pop the hood up and analyze underneath the surface, we see some notable sector differences across the major dividend and low volatility ETFs compared to the overall market. Using the "ETF X-Ray" tool on AllETF.com website, we compared the Broad Sector ETF weightings of the PowerShares S&P 500 Low Volatility ETF (SPLV), SPDR S&P Dividend ETF (SDY), and the SPDR S&P 500 ETF Trust (SPY) against each other. What we found was a major difference when comparing the SPLV and the SDY versus the SPY. Not surprisingly the SPLV is largely allocated towards more defensive, low volatility areas, like Utilities and Consumer Non-Cyclical, both of which make up over 53% of the SPLV. On the other hand, these sectors only makeup 14% of the SPY. SDY, which has a relatively low standard deviation, is overweight Consumer Non-Cyclical, as well, with a large weighting towards Financials, at 19.21%. In an effort to reduce 'offensive sector exposure', these funds can provide a lower-beta alternative.