# Low Volatility ETFs



## latebuyer (Nov 15, 2015)

Just wondering what people think of these. I'm interested but they all seem to have their problems. The BMO low volatility funds zlu and zli are both high in utilities which is sensitive to high interest rates. XMI (the ishares international low volatility etf) is allocated almost 30% to Japan. XMU (US low volatility) looks okay. XMW (all world low volatility etf) interests me but the mer is high and low volume. I'm interested for my tfsa but i'm not sure what to choose, if any.


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## Soils4Peace (Mar 14, 2010)

I like ZLB as a low cost (0.40% MER) way to hold Canadian stocks with less exposure to energy and materials. Before recent events it would have been a good holding for people working in those cyclical industries. That way they wouldn't lose their jobs and portfolio value at the same time. 

But you don't need to hold low volatility stocks to have a low volatility portfolio. In accordance with Modern Portfolio Theory, you can reduce overall volatility by holding uncorrelated investments.


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## latebuyer (Nov 15, 2015)

That is a good point. I think part of the problem is i don't hold bonds, i have a high interest savings account so the benefits of diversification are less evident. I do hold canadian, us and international equally balanced.


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## james4beach (Nov 15, 2012)

ZLB still continues to perform amazingly well since inception.

Canadian Couch Potato is running a multi-part series on low volatility strategy, but it also seems to cover a wide range of topics like general risk/reward, value investing, small caps vs large caps, momentum, etc.

http://canadiancouchpotato.com/2016/08/29/smart-beta-etfs-your-complete-guide/
http://canadiancouchpotato.com/2016/09/01/a-brief-history-of-smart-beta/
http://canadiancouchpotato.com/2016/09/05/understanding-the-value-factor/
http://canadiancouchpotato.com/2016/09/09/understanding-the-size-factor/
http://canadiancouchpotato.com/2016/09/15/understanding-the-momentum-factor/
http://canadiancouchpotato.com/2016/09/20/understanding-the-low-volatility-factor/

Some interesting discussion there. Is "smart beta" and beta-based portfolio construction just the latest gimmick, that will last a few years and then start disappointing? They also point to the research that showed this counter-intuitive result: "high volatility stocks actually tended to deliver lower returns, while low-vol stocks outperformed"

Then there's this observation



> Perhaps the biggest danger with low-volatility strategies is investor expectations. While it might be possible to select stocks with lower-than-average volatility without sacrificing expected returns, there will still be plenty of gut-wrenching drawdowns along the way. As The Wall Street Journal puts it in a recent article: “Expecting a low-volatility stock portfolio to eliminate most of the painful turbulence that stocks deliver isn’t realistic. *If you want a serious cushion for volatility in your portfolio, you need some bonds.”*


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## mordko (Jan 23, 2016)

I get Value. And Small. And Momentum. I don't get "low vol". Nikkei is round about the same value as it was throughout the 90s. How is that good? 

And all the great back testing data show is that low vol industries have been doing well because they are a "thing" right now.


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## james4beach (Nov 15, 2012)

ZLB is working as promised during this downturn. For example, it's (miraculously) up 1.7% over the last 5 days whereas XIC is down -0.7%

I'm impressed. I don't have any, but I've been watching ZLB for a while. At the very least, it has nice sector composition.


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## Jimmy (May 19, 2017)

I was worried ZLB may have been overvalued as it led all CDN equity ETFs for 3 yr return in 2017. It didn't have energy or materials stocks so avoided that big tank in the TSX in 2015 when oil fell. It is #6 for ytd this yr too.

Same story for ZLD (BMO low vol EAFE) Index for 2018 ytd up 2.23% (price) , XIN down 6.2%. The tilt is low beta, but these are large caps mainly value companies. They should do at least as well as the market but less bouncy


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## james4beach (Nov 15, 2012)

XIN is such a pitiful fund. I owned it years ago but never was a fan. I don't know what exactly is wrong with it... perhaps it's the currency hedging, but it does a lot worse than if you just held EFA (the US version) without hedging. And XIN seems to do chronically worse, whether the CAD is weak or strong. It doesn't seem right.

I suspect, but can't prove, that XIN suffered losses in their currency derivatives during the 2007-2009 turmoil. This is a problem with ETFs that rely on derivatives, and XIN contains a ton of currency derivatives to hedge the large number of currencies represented by foreign stocks. During the high volatility of the financial crisis, various serious problems emerged in the derivatives market and I have this feeling that XIN incurred some losses, either due to improper hedging, or derivatives gone bad (blowing up).

I now avoid any ETF that contains derivatives or currency hedging. I've recently been buying more ZSP (plain vanilla S&P 500 index, non hedged). Bought some today.

Sorry, off topic there. I don't like the high MER on ZLB but it continues to look like something that could actually be a core holding. Let's see how it does through the next downturn.


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## latebuyer (Nov 15, 2015)

According to morningstar's 5 year trailing returns zlb has beat xic by almost double (10.63 vs. 5.63) which I found surprising. My concern is that utility stocks will be hard hit with rising interest rates and that this will mute zlb's returns.


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## My Own Advisor (Sep 24, 2012)

ZLB is fine for folks that do not want to hold stocks directly....a good product....but a quick glance shows for your 0.39% MER that:

1. The biggest REITs are some of the top holdings - you can easily own SRU.UN, REI.UN, CAR.UN, HR.UN, etc. directly.
2. Canadian utilities are boring but also provide juicy dividends - you can own EMA, FTS, BEP.UN, CU, and AQN directly.
3. Own the usual 3 telcos. Done. Own those directly. 

Consider owning some WCN or DOL or both and that's 50% of fund but higher dividend yield than 2.7%. No?


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## james4beach (Nov 15, 2012)

My Own Advisor said:


> ZLB is fine for folks that do not want to hold stocks directly....a good product....but a quick glance shows for your 0.39% MER that:
> 
> 1. The biggest REITs are some of the top holdings - you can easily own SRU.UN, REI.UN, CAR.UN, HR.UN, etc. directly.
> 2. Canadian utilities are boring but also provide juicy dividends - you can own EMA, FTS, BEP.UN, CU, and AQN directly.
> ...


Sure, you could own some directly, but you also have to then manage and update the portfolio for decades to come. A lot of what you're paying for (in any fund) is the management and maintenance. You could build your own variant of what the fund holds today, and you will be OK for the next few years, but keeping the portfolio updated for decades to come is a lot of work. It seems to me that a lot of people first build a portfolio of individual stocks, but then generally neglect the positions in later years (buy & hold). Which is how they end up holding, for example, BBD.B and GE.

ETFs, whether XIU or ZLB, keep evolving and changing over the years.


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## james4beach (Nov 15, 2012)

ZLB still doing quite nicely relatively speaking... down 1.8% in the last 5 days versus 2.4% for XIC. I was skeptical about this thing but so far it seems less volatile than the broad stock index.

I just wonder how much long term performance one gives up in ZLB.


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## latebuyer (Nov 15, 2015)

Over 5 years, zlb beat xic according to morningstar. We'll have to see how it does going forward.


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## AltaRed (Jun 8, 2009)

james4beach said:


> ZLB still doing quite nicely relatively speaking... down 1.8% in the last 5 days versus 2.4% for XIC. I was skeptical about this thing but so far it seems less volatile than the broad stock index.
> 
> I just wonder how much long term performance one gives up in ZLB.


You probably won't know much until there is at least one full business cycle, including another commodity cycle. That is probably about a 15 year time frame (at least 10 years). A number of us who are 70 yrs of age or more don't have time for such cycles. We have to make our best guess.


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## Jimmy (May 19, 2017)

ZLB is like a large cap index fund w out oil, materials and tech really. IMO some tech is ok but I could do w out the wild swings in oil, mining and other commodity stocks.


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## Jimmy (May 19, 2017)

Tate lee said:


> Hi Guys,
> 
> Is low volatile ETF a better product for my retirement. I am looking for an investment to ensure I have a trouble free retirement plan. I need your help guys.


If you are retired you should have a large % in FI ie your age as a % to lower risk. Then be well diversified for the equity % ie 1/3 in CAN, US and Intl. The low volatile ETFs are less risky than the index funds and the returns are similar, maybe even a little better. They are designed to move ~ 50-60% w the market swings up and down ( ie Beta = ~ .6) so less bouncy. 

I would say to be extra safe couldn't hurt. The fees are a little higher , .35% vs .15% though but I would say the extra risk reduction is worth it. The BMO, Invesco series and Vanguard VVO are the best IMO.


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## james4beach (Nov 15, 2012)

Tate lee said:


> Hi Guys,
> 
> Is low volatile ETF a better product for my retirement. I am looking for an investment to ensure I have a trouble free retirement plan. I need your help guys.


Keep in mind though, while ZLB may be a little less volatile than other stock indexes, it's still stocks. Stocks are volatile and dangerous (meaning you could see large % declines) and that fact remains with this fund.


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## james4beach (Nov 15, 2012)

Another good year for ZLB, -2.77% in 2018 which was much better than -8.83% for XIC. It significantly outperformed the broad Canadian market and also outperformed my Canadian 5-pack.

I'm already fully allocated to Canadian stocks but I'm still considering ZLB for the future. I really like its sector breakdown, especially because it's pretty even across many sectors:

22% financials
15% utilities
12% consumer staples
11% communications
11% real estate
9% industrials
8% consumer discretionary
5% tech
4% materials
1% energy


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## Jimmy (May 19, 2017)

Have ZLD too BMO EAFE low vol . Down -.22% vs -13% for XIN. ZLH US low vol - 3.63 % vs - 8. 60 % for XSP

BMO select using beta ( Ishares use a portfolio covariance approach to reduce volatility in comparison) . I think their methodology is the best.


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## james4beach (Nov 15, 2012)

Today I was looking at some charts and the behaviour of ZLB compared to XIC
ZLB total return 5 year chart
XIC (TSX Composite) 5 year chart

Of course we have no idea if ZLB can keep doing this long term, but so far it's done an impressive job reducing volatility in Canadian stocks. Just look at those two charts and the difference in how they rise. Both perform similarly, but the shape is very different! I calculated the % magnitude of each drop from local high to low, the "drawdown" or worst possible loss along the way.

XIC experienced a 22% drop in 2015-2016, and another 16% drop in 2018.
ZLB had only an 11% drop in 2015-2016, and another 9% drop in 2018.

This is awfully impressive so far. Those drawdowns are much shallower and milder than the TSX Composite, by almost 50%. Kind of mind blowing to get virtually the same Canadian stock exposure with half the volatility!


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## Jimmy (May 19, 2017)

latebuyer said:


> According to morningstar's 5 year trailing returns zlb has beat xic by almost double (10.63 vs. 5.63) which I found surprising. My concern is that utility stocks will be hard hit with rising interest rates and that this will mute zlb's returns.


I think it should regress more to the mean overtime - it is supposed to be less vol than the mkt, not necessarily beat it all the time. XIC maybe down as oil is down over the last few years but in a strong new bull mkt should out perform ZLB. ZLB should be good if there is a slowdown in the next 2 years though.


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## AltaRed (Jun 8, 2009)

Jimmy said:


> I think it should regress more to the mean overtime - it is supposed to be less vol than the mkt, not necessarily beat it all the time. XIC maybe down as oil is down over the last few years but in a strong new bull mkt should out perform ZLB. ZLB should be good if there is a slowdown in the next 2 years though.


I agree ZLB has never been intended to beat the market. The data sample is simply way too small to reach that conclusion. ZLB is simply based on holding securities that are less volatile and on that basis, that generally means sector focused, e.g. consumer staples. If such sectors out perform the market long term, then ZLB will out perform. If not, neither will ZLB.

More simply, ZLB is for investors who cannot stomach a 6 flags roller coaster ride in equity markets.


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## Jimmy (May 19, 2017)

AltaRed said:


> I agree ZLB has never been intended to beat the market. The data sample is simply way too small to reach that conclusion. ZLB is simply based on holding securities that are less volatile and on that basis, that generally means sector focused, e.g. consumer staples. If such sectors out perform the market long term, then ZLB will out perform. If not, neither will ZLB.
> 
> More simply, ZLB is for investors who cannot stomach a 6 flags roller coaster ride in equity markets.


It is surprising how smooth the ZLB curve is. On the G&M, there is a volatility measure ( think it is SD over 100 days) . Anyway, ZLB is ~ 7.7 % only. XIU is 11%. Bond funds like XBB are only 3.8%. Very steady returns.


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## james4beach (Nov 15, 2012)

One noteworthy thing is ZLB's sector composition. It's much more equally weighted between sectors, which actually is a fundamental diversification benefit that isn't present in XIU or XIC. This sector diversification on its own should reduce volatility. So it could be more than _just_ choosing low volatility stocks for their portfolio.

This is a big reason that instead of investing in XIU directly, I refactor it to equal weight sectors. I think that should contribute to smoother returns over the years (remains to be seen).


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## cainvest (May 1, 2013)

james4beach said:


> One noteworthy thing is ZLB's sector composition. It's much more equally weighted between sectors, which actually is a fundamental diversification benefit that isn't present in XIU or XIC. This sector diversification on its own should reduce volatility. So it could be more than _just_ choosing low volatility stocks for their portfolio.


CDZ is much like ZLB minus the energy 18.51 vs 1.54. 
It appears they took the energy component and spread it between Tech, CD and CS.


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## fireseeker (Jul 24, 2017)

AltaRed said:


> More simply, ZLB is for investors who cannot stomach a 6 flags roller coaster ride in equity markets.


Which raises this question: Should such an investor use ZLB, or should they adjust their allocation to have more fixed income and less equity?


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## AltaRed (Jun 8, 2009)

fireseeker said:


> Which raises this question: Should such an investor use ZLB, or should they adjust their allocation to have more fixed income and less equity?


Guess it depends on how risk adverse one is. I am thinking of someone like a senior who is sensitive to capital preservation and a balanced fund like MAW104 is as risky as they dare go. If they want to limit their ex-Canada exposure, then ZLB and a GIC ladder, or a bond ETF is an alternative to that global balanced fund. And as James says, there is more balance between sectors in ZLB than a TSX Composite ETF.


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## james4beach (Nov 15, 2012)

cainvest said:


> CDZ is much like ZLB minus the energy 18.51 vs 1.54.
> It appears they took the energy component and spread it between Tech, CD and CS.


Yes I see that similarity as well between CDZ and ZLB. The good sector balance is a nice feature of both.



fireseeker said:


> Which raises this question: Should such an investor use ZLB, or should they adjust their allocation to have more fixed income and less equity?


Interesting question. I think asset allocation using fixed income is the more reliable way to control risk and downside. ZLB is using metrics to choose low volatility securities, but is doing so during a time in the markets that is quite calm (and we're in a bull market). There really aren't any assurances that these particular equities will remain "calm" during a true bear market. Equities in ZLB are still equities, and are much more likely to behave like equities than fixed income.

I'd say that an investor should still rely on equity/fixed income asset allocation to manage that risk. One should not expect ZLB to be immune to downturns.


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## cainvest (May 1, 2013)

AltaRed said:


> I am thinking of someone like a senior who is sensitive to capital preservation and a balanced fund like MAW104 is as risky as they dare go.


I wonder if for those in or near to their decumulation phase it would be a good idea to should switch from index (say XIU) to ZLB?
This would appear to help with sequence of returns risk right?


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## AltaRed (Jun 8, 2009)

cainvest said:


> I wonder if for those in or near to their decumulation phase it would be a good idea to should switch from index (say XIU) to ZLB?
> This would appear to help with sequence of returns risk right?


It would definitely help with sequence of returns risk assuming one cannot cherry pick their portfolio during market dips to avoid selling beaten up assets. 

However, this is likely prudent only if NOT in a taxable account with huge unrealized cap gains. It doesn't take long for a buy and hold portfolio to build up multiples in unrealized cap gains. My taxable accounts are already almost twice my cost base and that is only since a re-distribution of assets post-divorce in 2008. Imagine 20-30 years of unrealized cap gains growth taking a tax hit converting from XIU to ZLB.


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## cainvest (May 1, 2013)

AltaRed said:


> It would definitely help with sequence of returns risk assuming one cannot cherry pick their portfolio during market dips to avoid selling beaten up assets.
> 
> However, this is likely prudent only if NOT in a taxable account with huge unrealized cap gains. It doesn't take long for a buy and hold portfolio to build up multiples in unrealized cap gains. My taxable accounts are already almost twice my cost base and that is only since a re-distribution of assets post-divorce in 2008. Imagine 20-30 years of unrealized cap gains growth taking a tax hit converting from XIU to ZLB.


Good point, would only work for TFSA/RRSP. Wish the fund had a slightly longer track record to look at but it appears to be doing it's job.
I'll have to look at this, maybe as a pre-RIFF RRSP exchange.


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## OnlyMyOpinion (Sep 1, 2013)

cainvest said:


> I wonder if for those in or near to their decumulation phase it would be a good idea to should switch from index (say XIU) to ZLB?
> This would appear to help with sequence of returns risk right?


You might find this blog interesting.
Its not specific to low volatility/ZLB but relevant to moving away from 'vanilla' index etf's for retirement income:
How Can a High-Dividend Portfolio Exacerbate Sequence Risk? .

It was in a link provided by Brian5000. I haven't read it or its links in detail myself yet.


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## cainvest (May 1, 2013)

OnlyMyOpinion said:


> You might find this blog interesting.
> Its not specific to low volatility/ZLB but relevant to moving away from 'vanilla' index etf's for retirement income:
> How Can a High-Dividend Portfolio Exacerbate Sequence Risk? .


Not really relevant for this discussion but an interesting read, just skimmed it though.


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## AltaRed (Jun 8, 2009)

cainvest said:


> Not really relevant for this discussion but an interesting read, just skimmed it though.


It can be somewhat relevant from the perspective of 'sequence of returns' risk. The less volatile a portfolio, the less one might have to tap into downtrodden equity to fund one's cash flow needs. Of course, if one has a proper equity/FI allocation, fixed income can tide one over until equities recover. 

That all said, the article is written from a US perspective where equities generally do not have as high dividend yields overall as do Canadian equities. VTI yield is pretty low. Reach too high for yield and Total Return under performance can be one's nemesis in classical 4% SWR withdrawal methodology. YMMV


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## james4beach (Nov 15, 2012)

More volatility = more sequence of return risk. I think ZLB can help with sequence risk, assuming it continues having lower volatility through bear markets. Consider these two portfolios:

Portfolio A has 30% ZLB, 30% ZSP, 40% XBB
Portfolio B has 30% XIU, 30% ZSP, 40% XBB

Both have asset class diversification and get volatility reduction thanks to that. I think Portfolio A probably will have even lower volatility thanks to ZLB, but now that I look at this, how much volatility reduction would you get overall when ZLB is only a partial weight like this? I bet it would still help, though.



OnlyMyOpinion said:


> How Can a High-Dividend Portfolio Exacerbate Sequence Risk? .


The article points to (as I repeatedly do) the danger of trying to use dividends as a way to "solve" the sustainable withdrawal puzzle and depletion of capital. My own condensed version of this argument is in this post in a retirement thread.

There is a misconception out there that using dividends to generate "income" avoids withdrawing principal, and therefore softens sequence risk. Dividends make it _feel_ like you're not depleting capital during market downturns. But it's not true, because price gets knocked down every time there's a dividend. That article has a very important chart half way down the page, linked here. The dividends don't get around the withdrawing capital problem, because they too are withdrawing capital. And can lead to other dangers too, such as lack of diversification (e.g. these high bank weight portfolios in Canada).

Relevance ...
ZLB (low yield) can be used in a diversified portfolio, which would _not_ generate much income or distributions. Counter-intuitively, this could be a *better* retirement portfolio than one that's based on high dividend equities, and you can actually live off your capital for longer and withstand downturns better.

This better result would be thanks to lower volatility and better diversification, and nothing to do with dividends.


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## cainvest (May 1, 2013)

james4beach said:


> More volatility = more sequence of return risk. I think ZLB can help with sequence risk, assuming it continues having lower volatility through bear markets. Consider these two portfolios:
> 
> Portfolio A has 30% ZLB, 30% ZSP, 40% XBB
> Portfolio B has 30% XIU, 30% ZSP, 40% XBB
> ...


Yes due to being only 30% it'll make less of a difference, no doubts there. As opposed to the Dividend route, ZLB has performed well over it's (albeit short) lifespan only losing out to XIU in one year. Is it chasing returns or do they have a valid CDN market strategy ... only time would tell.


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## james4beach (Nov 15, 2012)

cainvest said:


> As opposed to the Dividend route, ZLB has performed well over it's (albeit short) lifespan only losing out to XIU in one year. Is it chasing returns or do they have a valid CDN market strategy ... only time would tell.


I wonder the same. I think the sector diversification is solid, that part is true diversification (the only "free lunch" in investing) but the rest of the strategy could have just worked out lucky in this period, and may not keep performing well going forward.

It's the age old question as soon as you step away from the index. No easy answers


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## james4beach (Nov 15, 2012)

ZLB seems to be better at dealing with short time frame volatility, rather than long time frame volatility. For example here's a chart showing ZLB (in green) overlaid with XIC (in black). They both drop the same way in December, when stocks were very weak. On the YTD rebound rally, ZLB provides a smoother experience than XIC.
http://schrts.co/KdfEudwQ

At this point I would expect that ZLB provides a smoother daily and monthly % move experience, but probably a similar long term return to XIC. In fact this can be seen pretty clearly in this 3 year overlay, where the two end up in the same place. It's just an easier ride with ZLB:
http://schrts.co/BPJJBPiV

That's attractive, I think. Again I think it somewhat comes out of the better sector diversification and less resources, the most volatile component of XIC.


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## john.cray (Dec 7, 2016)

james4beach said:


> ZLB seems to be better at dealing with short time frame volatility, rather than long time frame volatility. For example here's a chart showing ZLB (in green) overlaid with XIC (in black). They both drop the same way in December, when stocks were very weak. On the YTD rebound rally, ZLB provides a smoother experience than XIC.
> http://schrts.co/KdfEudwQ



This chart shows "performance" (relative change in %) of ZLB vs absolute price in XIC. If you were to use performance for both then ZLB beats XIC even more.

I think you're right about the sectors and the more even balancing. In essence ZLB provides a similar effect to the X-packs that people build here because,
it seems to me most people avoid materials and use equal weight sectors.

Here is a backtest of your current 5 pack against ZLB


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## james4beach (Nov 15, 2012)

john.cray said:


> I think you're right about the sectors and the more even balancing. In essence ZLB provides a similar effect to the X-packs that people build here because,
> *it seems to me most people avoid materials and use equal weight sectors.*
> 
> Here is a backtest of your current 5 pack against ZLB


I agree and that's a really nice find, with that backtest. Varying the dates I can see that my 5 pack is very similar to ZLB (no wonder I like both). Another way to state this is, my 5-pack behaves more like ZLB than the TSX Composite.

Indeed, avoiding commodities/materials and equal sector weights are two common traits across many of our X-packs, and ZLB. So now perhaps we can say that these all share a common approach which has worked out well so far.

But the key question is still... does that mean it's a good approach going forward?


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## john.cray (Dec 7, 2016)

james4beach said:


> But the key question is still... does that mean it's a good approach going forward?


Indeed.

The backtest above is also limited, since ZLB is relatively new ETF so not too much history.
You can totally compare your 5-pack with XIU (longest history) and see the difference after a certain point on.
For example here is my current holdings backtested since the earliest point (IPL - 2003)

It seems like for the first 5 years or so both XIU and my X-Pack were moving relatively close. Then 2008 and the crisis happened and they diverged significantly.
Is this what you see too? What might be the reason?


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## james4beach (Nov 15, 2012)

A minor correction actually. This is not exactly my 5-pack strategy. In my strategy, the holdings mirror the top weights in XIU so they change as XIU's composition changes as described here.


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## james4beach (Nov 15, 2012)

ZLB is the true hero today! I don't hold it, but I guess I should have!

XIC -9.3%
XIU -9.6%
*ZLB -5.7%*

Bravo, BMO!


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## james4beach (Nov 15, 2012)

For a long time, ZLB was an outperformer. More recently it's turned into an underperformer. The trailing 5 year performance of ZLB is now 9.1% versus 11.4% for XIC.

Now that we have the longer history, it looks like ZLB only did _consistently_ well from 2012-2016. In those first 4 years, it benefited (tremendously) from being underweight energy and commodities.

But ever since 2016, the performance became much closer to the broad index. Sometimes higher, sometimes lower, but ZLB isn't consistently doing better by any means.

I still think it's a good portfolio. As shown in the post above, it also delivered on its "low volatility" promise. I just don't expect it to outperform the index.


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## Observator (Jun 29, 2016)

Low volatility etf do not performed well lately. I used to own XMW and RWW for a long time and dumped them for good couple months ago because : 1- they dropped almost as much as non low volatility etf in march correction 2- they never fully recovered their 2020 february price. Look ZLB never recovered too. So for me, they was no more interesting. Until now I made a good decision because I would have had much lower returns in 2020 if I had kept them.


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## latebuyer (Nov 15, 2015)

I still own zlb. What I thought initially is it complements the broader canadian index and i still think thats the case. When you read about low volatility etfs they are not supposed to outperform overall, only in down markets. Thats why zlbs performance in march was so disappointing. I'll probaby hold onto it for now, but will keep an eye on it. I would think it does lower risk to hold it if you don't have all your holdings in an index so heavy weight in energy and financials.


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## MrBlackhill (Jun 10, 2020)

Solution : Buy ZGQ instead of XMW. 😇


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## james4beach (Nov 15, 2012)

latebuyer said:


> I still own zlb. What I thought initially is it complements the broader canadian index and i still think thats the case. When you read about low volatility etfs they are not supposed to outperform overall, only in down markets. Thats why zlbs performance in march was so disappointing. I'll probaby hold onto it for now, but will keep an eye on it. I would think it does lower risk to hold it if you don't have all your holdings in an index so heavy weight in energy and financials.


ZLB did soften the blow in March very slightly. The standard index XIC had a drawdown (peak to trough) of 37.2% whereas ZLB had a drawdown of 34% which is slightly better.

But yeah, now that I look at those numbers, they aren't too different. ZLB was hit almost as badly.

Remember though @latebuyer ... it's just a different portfolio. Any time you go with anything other than the index, almost by definition, you will sometimes underperform the index and sometimes outperform. It's guaranteed to happen!

If you committed to ZLB some time ago, I'd say it's best to stick with it. The worst thing you can do is constantly jump from one ETF to another... chasing returns. The ZLB portfolio still looks good, it's well diversified, and should do fine in the long term. It really doesn't matter that it's underperforming at the moment.


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## latebuyer (Nov 15, 2015)

Thanks. Yes, that is what i'm thinking - stick with it. Its actually the canadian holding in my tfsa and i don't hold a lot.


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## Rosey (Oct 23, 2018)

ZPAY uses puts & calls to avg @ 5.5% run. For my wif’s portfolio I have been moving to @ 50% this and then spreading the balance with ZBAL some Evolve and ARK ETF’s.


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## james4beach (Nov 15, 2012)

ZLB proving its worth again today. The market was down 1.4%, but ZLB was *up* 0.44%

Maybe we'll see a repeat of its heroic volatility suppression, like a year ago?

This thing may not beat the market, but reducing volatility is still useful. If it matches market performance long term with milder movements, I'd consider that a win.

I don't hold it but I just peeked at its top holdings, and I actually hold many of them. It's a good portfolio.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> ZLB proving its worth again today. The market was down 1.4%, but ZLB was *up* 0.44%
> 
> Maybe we'll see a repeat of its heroic volatility suppression, like a year ago?
> 
> ...


Not so sure what's so heroic about low volatility when ZLB has still barely recovered from the 2020 crash. It suppressed the small volatility, but not the big downside volatility... Maybe it's an exception. Or maybe it's the first time it faces a crash and now we see it can't handle it.

ZGQ has interestingly low volatility, dropped less than ZLB and recovered pretty quickly.

ZLB.TO - BMO Low Volatility Canadian Equity ETF


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