IShares Edge MSCI Minimum Volatility EAFE ETF (EFAV) offers a well-diversified foreign developed stock portfolio that takes a holistic approach to reduce volatility for a low fee. It should offer a smoother ride and better risk/reward profile than most of its peers over the long term, supporting its Morningstar Analyst Rating of Silver.
The fund attempts to create the least-volatile portfolio possible with large- and mid-cap stocks listed in developed markets in Europe, Australia, and Asia under a set of constraints. These include limiting sector and country tilts relative to the MSCI EAFE Index, which improves diversification. This strategy doesn't just target the least-volatile stocks. It also takes into account each stock's exposure to common risk factors and how they interact with each other to affect the portfolio's overall volatility.
Daniel Sotiroff does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.