NEW YORK ( TheStreet) -- Two new exchange-traded funds from PowerShares offer interesting twists on that most plain vanilla of ETFs: the S&P 500 index fund.

They are the PowerShares S&P 500 High Beta Portfolio ( SPHB) and the PowerShares S&P 500 Low Volatility Portfolio ( SPLV).

These new funds seem to appeal to two different types of investors: those who want to make aggressive, speculative bets without the potential disadvantages of levered long funds; and those who have lost confidence in their investing abilities or have realized they have a limited tolerance for volatility.

The High Beta Portfolio owns the 100 most volatile (highest-beta) stocks from the S&P 500, and the Low Volatility Portfolio owns the 100 least volatile stocks from the same index.

In the first fund, higher-volatility stocks get higher weightings, while in the second, lower-volatility stocks get higher weightings.

The funds rescreen their holdings once a year and rebalance them each quarter.

For people who have learned that they have a low tolerance for wide market gyrations, the Low Volatility Portfolio may be appealing.

The back test for this fund is eye-opening. Its holdings would have performed better than the S&P 500 during all three years of the tech bust. In 2000, the portfolio would have risen 25%, while the S&P 500 fell 9%.

In 2008, the S&P 500 declined 37%, while the Low Volatility Portfolio would have fallen just 21%.

The key to understanding these results is understanding what's in the Low Volatility Portfolio.

This fund will tend to have heavier weightings toward health care, utility and consumer staple stocks. Right now, its biggest components include Johnson & Johnson ( JNJ), Southern Company ( SO) and Clorox ( CLX).

These companies and others like them obviously are more likely to see more muted moves than the broader market, making them a "get rich slowly" product. The 10-year annualized return of the back test is 6.94%, vs. 5.13% for the S&P 500.

The Low Volatility Portfolio allocates 29% to utilities and 28% to consumer staples, with all other sectors being much smaller. That sector allocation should make for a high dividend yield. The underlying index currently yields 3.4%, less the 0.25% expense ration. The fund could yield better than 3%, but that remains to be seen until it commences payouts.

The huge weighting in utilities could cause the fund to lag in an environment of rising interest rates. Typically utility stocks don't do well when rates rise, because bonds become more competitive with higher-yielding stocks. Although there may be little visibility now for rising rates, any fund heavy in utilities would struggle against that backdrop.

The High Beta Portfolio has a potentially very interesting application. As a reminder, this fund owns the 100 stocks from the S&P 500 that have the highest betas.

The volatile nature of its holdings make it almost like a levered long fund such as the ProShares Ultra S&P 500 ( SSO) but without the derivatives under the hood.

It also doesn't have the daily reset that makes the levered funds difficult to hold longer term. Nor does it have the restrictions that many brokerage firms impose on levered funds.

The beta on the underlying index for the High Beta Portfolio is currently 1.5858 (although obviously it will vary over time). Although that's a long way from the 2 times leverage of the levered funds, it does offer investors some leverage on the S&P 500.

Viewed in this light, this fund has a speculative application, but speculation plays an important role in the functioning of markets, and aggressive trading and investing is suitable for some investors.

Although it is difficult to know whether these funds will catch on, I think they are innovative and should offer better ways to invest for some market participants.

At the time of publication, Nusbaum had no positions in securities mentioned.

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Roger Nusbaum is a portfolio manager with Your Source Financial of Phoenix, and the author of Random Roger's Big Picture Blog. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Nusbaum appreciates your feedback; click here to send him an email.

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