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Spdr Russell 2000 Low Volatility Etf

The SPDR Russell 2000 Low Volatility ETF (SMLV) is a type of exchange-traded fund (ETF) that is specifically designed to offer investors exposure to the lowest volatility stocks within the small-cap segment of the US equity market.

The fund is designed to track the performance of the Russell 2000 Index, which is a widely followed benchmark that comprises publicly traded small-cap companies in the US stock market. However, unlike the standard Russell 2000 Index, which weights its constituents based on market capitalization, the low volatility variant uses a unique indexing approach that focuses on companies that exhibit lower volatility characteristics.

To accomplish this, the fund employs a rules-based methodology that screens for stocks with lower volatility credentials within the Russell 2000 Index. Specifically, it evaluates each stock's volatility over the past 12 months and then ranks them accordingly. The 12% of the least volatile stocks within the index are selected for inclusion in the fund, subject to certain weighting constraints.

The fund's holdings are diversified across various sectors, though Information Technology, Health Care, and Consumer Discretionary receive the most significant allocations. Individual stocks are capped at 4% weight each to limit exposure to single stock risk, and the fund rebalances semi-annually in response to market changes.

SMLV has become a popular choice for investors seeking to temper the risk associated with small-cap investing. A lower volatility strategy may offer better downside protection in turbulent markets, which make it a valuable addition to a diversified portfolio, particularly for risk-averse investors, long-term investors, and those nearing retirement.