1 ETF to Help You Hedge Your Portfolio in Q4

1 ETF to Help You Hedge Your Portfolio in Q4

Posted On November 25, 2022 11:16 am

The stock market has had a challenging year, with the major indexes witnessing significant declines. The uncertain macroeconomic and geopolitical concerns have significantly dampened investor sentiment this year.

The underperformance of major market indexes means that many fundamentally strong stocks are available at a discounted valuation. Minutes from the Federal Reserve’s policy meeting earlier this month released yesterday showed that the central bank would slow down the current pace of rate hikes. This should bode well for quality stocks.

Inflation eased slightly in October. Although the Fed might be slowing down the current pace of rate hikes, the final rate of interest rates could be higher than initially predicted. This is expected to trigger a recession next year.

Therefore, investors can hedge their portfolios against the economic downturn by adding Vanguard Value Index Fund (VTV – Get Rating). The Vanguard Group, Inc, manages VTV. The fund invests in stocks of companies operating across diversified sectors. It invests in large-cap value stocks. The find seeks to track the performance of the CRSE US Large Cap Value Index.

In an investor note, BofA said, “We found that seasonality appears to benefit value factors. Interestingly, value funds also appear to benefit, as historically, 43% of value funds outperformed their benchmark during Nov.-Jan. vs. 36% of core funds and 39% of growth funds.”

VTV is expected to do well due to its exposure to large-cap value stocks. These companies generally belong to resilient sectors and are trading at a discount to their peers. Moreover, its solid dividend payouts make it an attractive investment.

The ETF has gained 9.9% in price over the past month and 0.6% over the past year to close the last trading session at $144.69.

Here are the factors that make VTV a solid investment now:

Fund Stats

VTV has $103.99 billion in assets under management. Its expense ratio of 0.04% is significantly lower than the industry average of 0.49%. Over the past three months, the fund witnessed a net inflow of $591.02 million. It has a beta of 0.91 and a NAV of $144.63 as of November 23, 2022.

Top Holdings

The fund has a total of 343 holdings. Its principal holdings include UnitedHealth Group Incorporated (UNH), with a 3.08% weight, followed by Berkshire Hathaway Inc. (BRK.B), with a 3.04% weight, and Exxon Mobil Corporation (XOM), with 2.74%.

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