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2 Ways to Limit Volatility

These ETFs have different approaches to the same goal, but one of them is a better core holding for long-term investors.

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Alex Bryan: Low-volatility strategies have gained popularity over the last couple of years. Academic research has shown that stocks with low volatility tend to outperform their more volatile counterparts. Researchers believe this is partially because investors face leverage constraints, and they tend to overweight riskier stocks in an attempt to boost their returns and neglect some more boring, steady-Eddie stocks, which may cause them to become undervalued relative to the risk.

Alex Bryan has a position in the following securities mentioned above: USMV. Find out about Morningstar’s editorial policies.