Video Reports

Embed this video

Copy Code

Link to this video

Get LinkEmbedLicenseRecommend (-)Print
Bookmark and Share

By Russel Kinnel and Christine Benz | 07-01-2015 10:00 AM

Lower Volatility Among Stock Funds: Too Good to Be True?

A handful of funds have seen volatility decline even more than the overall market, but this may be only temporary for some of them, says Morningstar's Russ Kinnel.

Christine Benz: Hi, I'm Christine Benz for Volatility for stocks and, in turn, many stock funds has come down in recent years. Joining me to discuss this phenomenon is director of fund research and Morningstar FundInvestor editor Russ Kinnel.

Russ, thank you so much for being here.

Russ Kinnel: Good to be here.

Benz: Russ, in your latest Morningstar FundInvestor cover story, you wrote about trends in standard deviation. You started by looking at the total U.S. equity market as well as foreign equity markets. You noted this downtrend. What do you think is driving that?

Kinnel: The market, as a whole, has become much less volatile. We were in an economic shock in 2008-09. Things were really changing rapidly, but things have kind of moderated since then. We've kind of evolved on this moderate growth trajectory where there's a lot more clarity in the markets. We've had fewer shocks, and that's clear in the volatility in the equity markets. So, things have become much less volatile.

Benz: In your article, you looked at funds where, even though overall equity-market volatility has declined, these particular funds have seen their volatility decline to an even greater extent. Let's take a look at a couple of them because you drilled into why this might be. Let's start with Fidelity Small Cap Stock (FSLCX). You think that that's kind of a fund-specific story there.

Kinnel: That's right. Its volatility has come down a lot. Part of that is market, but part of it is a manager change and strategy tweak. Lionel Harris took over the fund in November 2011. He's got more of a quality bias and a little more of a steady-growth outlook. That means a more stable, staid kind of performance, and we're seeing that in the returns--in the way the fund has performed. And its volatility has come down a lot. So, I think there is something there. He really is a lower-risk manager than his predecessor.

Read Full Transcript
{0}-{1} of {2} Comments
{0}-{1} of {2} Comment
  • This post has been reported.
  • Comment removed for violation of Terms of Use ({0})
    Please create a username to comment on this article