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By Shannon Zimmerman | 10-04-2012 12:00 PM

Low Volatility vs High Dividend: Which One Is Better?

Morningstar ETF Invest Conference panelists discuss the similarities, differences, and appeal of these two strategies in today's low-growth, low-return, and high-volatility market.

Shannon Zimmerman: Good morning everyone and welcome to our panel, "Low Volatility Versus High Dividend: Which One Is Better?"

I'm Shannon Zimmerman. I'm an associate director of fund analysis at Morningstar, and I'm very pleased to be here for this panel today, to moderate this panel with a group of experts who I had a chance to pre-interview in preparing for today's session, and I know that they are all very engaging and engaged with the topic that we are going to discuss today.

Let me give you a brief introduction for each of our panelists. Beginning on my far right, Raman Subramanian is an executive director at MSCI, and he's responsible for the creation of new methodologies, the improvement of existing methodologies as well as research in the strategic positioning of their index series covering various asset classes.

Next to Raman is Craig Lazzara, who is the head of index investing for the S&P Dow Jones Indices, and he was previously the product manager for the firm's U.S. equity and real estate indices, including the Case-Shiller Home Price Index.

Then finally Jeremy Schwartz, the director of research at WisdomTree, and he is responsible for equity index construction, the process there, and he oversees the research process across the entire WisdomTree equity family.

So with those introductions I want to begin with a little bit of a challenge to the premise embedded in the title of this panel, and ask each of our panelists to speak to that "versus" part of it. Is it the case that it's one or the other? I mean in terms of investment product marketing, these strategies are often written about and promoted in quite different ways, yet one has to assume given the typically low-volatility nature of dividend strategies that there is some level of correlation.

Jeremy, you want to go ahead and get started with that question.

Jeremy Schwartz: Sure, thanks.

Thanks everybody for coming to our panel today. I'd there are some similarities between high dividend strategies and low volatility strategies, but they are focused on different things. The low volatility obviously has a sort of the market on beta or volatility, and they are really focused on that return stream, whereas a dividend yield focus is really focusing on the valuation characteristics. So, it's more about, what price are you paying to access those securities. So, there is this difference between returns versus valuation focus.

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