Best Low-Volatility ETFs When the Market is a Roller Coaster

Best Low-Volatility ETFs When the Market is a Roller Coaster

If you are deciding on buying mutual funds, it is important to be aware of factors other than volatility that affect and indicate the risk posed by mutual funds. Beta by itself is limited and can be skewed due to factors other than the market risk affecting the fund’s volatility. Investors expecting the market to be bullish may choose funds exhibiting high betas, which increases the investors’ chances of beating the market. If an investor expects the market to be bearish in the near future, the funds with betas less than one are a good choice because they would be expected to decline less in value than the index. For example, if a fund had a beta of 0.5, and the S&P 500 declined by 6%, the fund would be expected to decline only 3%.

Utilities Select Sector SPDR Fund

In recent years, the company has more typically delivered 3% to 4% annual EPS growth. “We believe that RSG is poised for a continued share price recovery as the U.S. economy recovers,” writes Argus Research, which rates the stock at Buy and recently upgraded its 12-month price target from $95 per share to $102. “On valuation, we believe this well-run company deserves to trade at a premium to historical average multiples based on its solid balance sheet, focus on growth through acquisitions, and industry position.” Ongoing performance evaluation and risk management, including the use of metrics like the Sharpe ratio and stress testing techniques, can help ensure that a low-volatility strategy remains aligned with investors’ goals and objectives. In terms of concerns, the index can underperform in a non-volatile market as some of the data indicated.

Standard Deviation

K-C’s organic sales grew 4% during the June quarter, and the company set all-time records for adjusted EPS and cash flow. The company also updated its 2020 guidance and predicts 4% to 5% organic sales gains and 6% to 9% adjusted operating profit growth this year. At least one-quarter of the world’s population uses Kimberly-Clark products, and the company holds either No. 1 or No. 2 worldwide market shares in diapers, feminine care and bathroom tissue. The pandemic has spurred demand in 2020 for the company’s line of KC Professional brands, which include tissues and paper towels designed for away-from-home use, sterile wipes and various other exchange rate singapore dollar to euro safety products. Colgate’s organic sales rose nearly 6% in the June quarter and EPS improved 9% as a result of higher pricing on a worldwide basis and elevated COVID-related demand for cleaning supplies.

If the market falls, the puts increase in value and offset losses from the portfolio. The most simple definition of volatility is a reflection of the degree to which price moves. A stock with a price that fluctuates wildly—hits new highs and lows or moves erratically—is considered highly volatile. Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more.

A second concern related to this strategy is that it is interest-rate sensitive. This has been seen globally that when interest rates go down, low volatility investing does well. But when interest rates are moving up, then the strategy does not how to day trade for a living ebook do as well.

True, the stock market has done well this year thanks to an increased appetite for riskier assets – including many high-flying growth stocks. But it’s worth remembering that uncertainty was the name of the game in years prior, and it may be premature to sound the “all clear.” It is one of the largest pharmaceutical players in the world, led by cancer wonder-drug Keytruda – itself a $6.3 billion business during the third quarter of 2023 alone, which, by the by, was 17% higher than in the year-ago period. The company’s product lineup also includes HPV vaccine Gardasil, neuromuscular blockade treatment Bridion and ovarian cancer drug Lynparza, not to mention a billion-dollar-plus animal health division. But no matter what the economy is doing, you need to brush your teeth, and you need to wipe your … well, you get where we’re going with this. Those products – as well as foods, drinks, and a few other necessities – are consumer staples, and the companies that provide these products tend to be stable performers and offer higher-than-average dividends.

Ultimately, the low-volatility factor can play a significant role in asset allocation and complement other factor strategies, contributing to a well-diversified and efficient portfolio. Evaluating the performance of a low-volatility strategy requires assessing both absolute and relative performance, as well as risk-adjusted metrics, such as the Sharpe ratio. Combining these factors in a portfolio can help to further diversify risk and improve performance across different market environments. A key characteristic of low-volatility stocks is the world’s 10 most traded currencies their low beta values, which signify a lower correlation with market movements. A stock with a beta value of less than 1 is considered to have lower volatility than the overall market, while a beta value greater than 1 indicates higher volatility.

Dividend-Paying Stocks

If you’re aware of (and OK with) this risk, however, low-vol stocks can be a useful addition to your portfolio. As you can see, investors in Company B have more money at the end of three years than those who invested in Company A. That’s because, when a company loses money in one year, it has to earn more the next year to make up for the loss. High volatility refers to drastic swings in value, while low volatility refers to smaller swings over time. Lisa currently serves as an equity research analyst for Singular Research covering small-cap healthcare, medical device and broadcast media stocks. Profit and prosper with the best of Kiplinger’s advice on investing, taxes, retirement, personal finance and much more. Dollar General has several growth initiatives underway – including the launch of DG Fresh, DG Pickup and its higher-margin non-consumables segment – that should support continued strong growth.

1. Sales benefitted from the revenue contribution from recently opened stores, higher average transaction amounts per customer and COVID concerns that had customers shopping closer to home for every day essential items.
2. A veteran journalist with extensive capital markets experience, Jeff has written about Wall Street and investing since 2008.
3. But generally, when compared to the benchmark NIFTY 100 index, the Low Volatility 30 index seems to show a better cushioning of the downside.
4. A fund with a beta very close to one means the fund’s performance closely matches the index or benchmark.
5. The company commenced dividend payments last May and has held dividend payments steady at 72 cents annually, good for a modest current yield of 1%.
6. Take self-paced courses to master the fundamentals of finance and connect with like-minded individuals.

Global food giant General Mills (GIS, $62.57) owns popular brands such as Cheerios cereal, Yoplait yogurt, Nature Valley granola bars, Häagen-Dazs ice cream, Betty Crocker and Pillsbury baking products and Blue Buffalo pet food. Verizon’s EPS declined during the June quarter due to the COVID-related lockdown, which temporarily closed its stores. But Verizon increased free cash flow a whopping 74% in the first half of 2020 to $13.7 billion and also trimmed $5.7 billion from net debt. Also, VZ has cut $7.2 billion from its expenses since 2018, putting it well on track to achieve its goal of $10 billion in cumulative cost savings by 2021. DG’s dividend isn’t much to look at, at 0.7% in yield, but it’s growing it at a rapid rate. Meanwhile, a low payout ratio of just 14% of earnings leaves ample room for future increases.

Read on to learn about the four most common volatility measures and how they are applied in the type of risk analysis based on modern portfolio theory. While puts gain value in a down market, all options, generally speaking, gain value when volatility increases. A long straddle combines both a call and a put option on the same underlying at the same strike price. The long straddle option strategy is a bet that the underlying asset will move significantly in price, either higher or lower. For those looking to speculate on volatility changes, or to trade volatility instruments to hedge existing positions, you can look to VIX futures and ETFs. In addition, options contracts are priced based on the implied volatility of stocks (or indices), and they can be used to make bets on or hedge volatility changes.

Low-volatility stocks are ports in a storm for investors who can’t stomach violent market swings. Their relatively tranquil behavior can not only help reduce losses in a downturn – they can stay your hand, preventing you from panic selling and potentially ruining your retirement. If you’re not keen on doing a lot of legwork to find low-volatility investments, you can get good exposure to them through mutual funds and exchange-traded funds (ETFs) that invest exclusively in these types of stocks.

Low Volatility Investing: What Is It And Does It Work?

It has to do with the compounding value of an investment and how big changes in annual returns can have an abnormal impact on money. This company has an average annual return of 7%, but as you can see, returns are not consistent from year to year. Citigroup analyst Wendy Nicholson initiated coverage of K shares with a Buy rating in August. She sees the company as a better value than some consumer staple competitors and expects Kellogg’s margins to rise as its emerging-market operations become more profitable.