Making Your Money Last

What Funds Are Out of the Kiplinger ETF 20 and Why

Low-volatility strategies disappointed, leading to four changes in the lineup.

This year, we made four changes to the ETF 20. Low-volatility strategies disappointed. Invesco S&P SmallCap Low Volatility (XSLV) is designed to offer a smooth ride in a typically rocky asset class. But during the COVID sell-off, it tumbled 44%—more than the 41% loss in the Russell 2000 small-company index. The fund was loaded with real estate, utility and financial stocks, all of which suffered during the downturn.

Low-volatility strategies are steadier than the broad market about 85% of the time, says Nick Kalivas, senior equity ETF strategist at Invesco. “This time was one of the periods in which low volatility failed to provide downside protection,” he says. A low-volatility investment strategy can work well over the long term. But it requires monitoring—more than we like for a primary holding. So we replaced it with a back-to-basics small-company index fund, iShares Core S&P Small-Cap.

For similar reasons, we’re cutting iShares Edge MSCI Min Vol USA (USMV). Over the past year, the fund lost 1.1%, compared with an 8.5% gain in the S&P 500. It held up better than the broad index during the March sell-off, but only by one percentage point. We took the opportunity to add Invesco WilderHill Clean Energy in its stead.

Low interest rates crimp bank profits, but financial firms tend to do well during economic recoveries. To balance the risks and opportunities, we’re ousting Financial Select Sector SPDR (XLF) in favor of a financial preferred-stock fund, Invesco Financial Preferred. Preferred stocks pay fixed dividends and are called “preferred” because a company must pay dividends on preferred shares before it pays common-stock dividends. This move allows us to maintain a foothold in the financial sector, but in a fund with more stability and a higher yield.  

With interest rates expected to stay low for a lot longer, Pimco Enhanced Low Duration Active (LDUR) is out, too. It does well when rates rise, and we’ve got that possibility covered elsewhere in our roster with Invesco Senior Loan ETF, which holds floating-rate notes that adjust higher along with market rates. The cut makes room for a promising intermediate core bond fund, Vanguard Intermediate-Term Bond.

Most Popular

Where's My Stimulus Check? Use the IRS's "Get My Payment" Portal to Get an Answer
Coronavirus and Your Money

Where's My Stimulus Check? Use the IRS's "Get My Payment" Portal to Get an Answer

The IRS has an online tool that lets you track the status of your stimulus checks.
February 19, 2021
Want More Tax-Free Retirement Income? One Man’s Whole Life Decision
life insurance

Want More Tax-Free Retirement Income? One Man’s Whole Life Decision

Whole life insurance might not be something that’s on your retirement planning radar, but for this client, here’s how it served his need to control ta…
February 23, 2021
The Current Plan for $1,400 Checks
Coronavirus and Your Money

The Current Plan for $1,400 Checks

Here's what you need to know about the stimulus check plan currently being considered in Congress for President Biden's COVID-relief package.
February 18, 2021

Recommended

T. Rowe Price Financial Services Banks on a Turnaround
Stock Market Today

T. Rowe Price Financial Services Banks on a Turnaround

This fund is a good way to bet on an economic rebound.
February 24, 2021
DSTL: A Value Fund With a Twist
Becoming an Investor

DSTL: A Value Fund With a Twist

The fund’s 51.3% return since its inception in 2018 has more than tripled that of traditional value funds.
February 24, 2021
2 Top-Tier T. Rowe Price Mutual Funds
mutual funds

2 Top-Tier T. Rowe Price Mutual Funds

T. Rowe Price's mutual funds typically stand out among their peers, but these two selections provide elite equity and bond exposure for this point in …
February 24, 2021
Earth-First Funds Are Soaring
Markets

Earth-First Funds Are Soaring

Funds with sustainability in mind are super popular these days; these six are ready to deliver returns.
February 24, 2021