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ETF Specialist

Global Diversification With a Smoother Ride

Although this low-volatility global equity ETF holds U.S. stocks, it has offered more diversification from the S&P 500 than the average world-stock fund.

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 IShares MSCI All Country World Minimum Volatility (ACWV) tracks an index that is designed to be less volatile than its market-cap-weighted parent index--the MSCI All Country World Index, or MSCI ACWI. Low-volatility strategies seek to exploit the observed phenomenon that a portfolio of stocks with smaller price fluctuations tends to outperform a portfolio of stocks with larger price fluctuations over the long term.

Historically, this fund's correlation to the S&P 500 has generally been lower than the correlation between the average world-stock fund and the S&P 500 and has been similar to the correlation between the average foreign large-blend fund and the S&P 500. So even though this fund has a 54% weighting in U.S. equities, it does have the potential to provide better diversification (relative to the average world-stock fund) for an investor with a large exposure to U.S. equities.

Patricia Oey does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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