Building a well-rounded investment portfolio involves considering risk-adjusted returns. By understanding the risk associated with an investment, investors can make informed decisions and work towards achieving their long-term financial goals.
This article highlights three ETFs with high risk-adjusted returns that can appeal to risk-averse investors looking for stability and growth in their portfolios.
Avantis U.S. Equity ETF
Managed by American Century Investments, the Avantis U.S. Equity ETF (AVUS) has gained popularity with its impressive performance and reasonable fees. Despite being an actively managed ETF, AVUS charges a competitive expense ratio of 0.15%. With a five-star rating from Morningstar, AVUS has demonstrated its pedigree since its launch in September 2019.
The ETF's sector allocations include information technology, financials, and health care, reflecting its diverse holdings. Apple, Microsoft, and Amazon are among its top holdings, showcasing its exposure to well-established companies. AVUS boasts a three-year average annual return of 17.6%, making it an attractive choice for long-term investors seeking stable growth.
Invesco S&P MidCap 400 Equal Weight ETF
For investors who appreciate the potential of mid-cap stocks, the Invesco S&P MidCap 400 Equal Weight ETF (EWMC) offers an appealing opportunity. By equal-weighting the holdings in the S&P MidCap 400 Equal Weight Index, EWMC ensures that the best-performing stocks receive due recognition. This quarterly rebalancing strategy helps investors capitalize on the growth potential of mid-cap companies.
Despite its track record since December 2010, EWMC remains relatively undiscovered with only $181.7 million in net assets. However, its five-star rating from Morningstar over multiple time periods and a solid annualized total return of 8.9% over the past decade make it a compelling choice. With mid-cap stocks presenting ample growth prospects, EWMC can be a valuable addition to a well-diversified portfolio.
Pacer US Cash Cows 100 ETF
The Pacer US Cash Cows 100 ETF (COWZ) focuses on companies with strong free cash flow, making it an attractive option for value-oriented investors. COWZ selects the top 100 companies based on free cash flow yield in the Russell 1000 Index, using a comprehensive approach that considers a company's entire capital structure.
With a five-star rating from Morningstar and a history of strong performance, COWZ has delivered consistent returns since its inception in 2016. Its sector allocation reflects its emphasis on free cash flow, with energy leading the way, followed by health care and materials. The ETF's holdings have a weighted average market cap of $62.9 billion and offer a compelling free cash flow yield of 12.05%.
Conclusion
Diversifying your portfolio with ETFs that offer high risk-adjusted returns can help you achieve your long-term financial goals while minimizing risk. The Avantis U.S. Equity ETF, Invesco S&P MidCap 400 Equal Weight ETF, and Pacer US Cash Cows 100 ETF present compelling investment options for risk-averse investors.
With their strong performance records, reasonable fees, and focus on well-established companies, these ETFs can contribute to the stability and growth of your investment portfolio. Consider adding them to your investment strategy and enjoy the potential benefits they offer in the long haul.
Additional Information
In addition to the ETFs discussed in the article, there are a number of other ETFs that offer high risk-adjusted returns. Some of these ETFs include:
- Vanguard Total Stock Market ETF (VTI)
- iShares Core S&P 500 ETF (IVV)
- SPDR S&P 500 ETF Trust (SPY)
- Schwab U.S. Large-Cap ETF (SCHX)
- Fidelity 500 Index Fund (FNILX)
These ETFs are all passively managed and have low expense ratios. They also have long track records of strong performance.
When choosing ETFs, it is important to consider your investment goals, risk tolerance, and time horizon. You should also consider the fees associated with the ETF and its track record of performance. By carefully selecting ETFs, you can build a well-diversified portfolio that can help you achieve your long-term financial goals.
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