Maybe it’s a little greedy to complain about a market that has delivered more than 6% in total returns through just four months into 2017. The S&P 500 has done well, but it has been a nauseating ride … though it hasn’t been so bad for investors in low-volatility exchange-traded funds.
For the uninitiated, low-volatility ETFs are pretty much exactly what they sound like — they’re groups of stocks that are selected in a way that should reduce the beta of the fund, meaning that the daily swings of the broader market shouldn’t be as sharp in these funds.
And the best ETFs in the low-volatility space are able to do this without sacrificing performance.
Several low-volatility ETFs focusing on large-cap stocks have actually delivered better returns than the S&P 500 this year, and they’ve done so with far less “wiggle.” Take a look at the chart below comparing a low-volatility fund (orange line) and the SPDR S&P 500 ETF Trust (NYSEARCA:SPY):
How do they do it? Typically, low-volatility strategies screen for relative volatility versus peers, but also look for other measures of quality, whether it’s offering a dividend or maintaining positive earnings.
Today, we’ll look at some of the best low-volatility ETFs in the space that can replace a few different themes in your portfolio, such as large-cap growth, international stocks and even small caps.