Protect Yourself When the Market Turns Frantic

Low-volatility ETFs aim to smooth stock gyrations

- JEFF REEVES

The extreme volatility in the stock market over the past few years has sparked curiosity about a special brand of exchange-traded fund aimed at calming things down: the low-volatility ETF. True, the stock market is doing pretty well in 2023 thanks to an increased appetite for riskier assets, including many beaten-down growth stocks. But it may be premature to sound the all clear.

Indeed, investors still face plenty of unknowns, including those surrounding the Federal Reserve’s future monetary plans and fallout from the recent bank crisis. “Volatility is the watchword for the next few months,” says Nancy Tengler, chief investment officer of wealth advisory firm Laffer Tengler Investments.

If you’re looking to get back into the market in a responsible way, or if you simply want to rejigger your portfolio to reflect the new reality on Wall Street, lowvolatility ETFs are an option. They allow investors access to the stock market but with a lower risk profile than a typical index fund.

However, it’s important to understand that while these funds often reduce overall volatility over longer periods, they can still suffer mightily during sudden market shocks. And even the best of these ETFs may underperform the market. That’s because higher risk can often result in higher returns, and excluding more-dynamic companies might hold your portfolio back over the long run. But if you want additional peace of mind, or you’re more concerned with capital preservation than growth, the following low-volatility ETFs have something to offer.

ISHARES MSCI USA MIN VOL FAC