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Low-Volatility ETFs at the Popular Table

Although asset flows into these funds have been robust this year, be mindful of expenses and don't chase performance, warns Morningstar's Alina Lamy.

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Alina Lamy: Low-volatility ETFs have seen increased flows lately, and it's a trend that’s caught our attention. Currently there are 18 low-volatility ETFs in Morningstar's database, with $23 billion in assets as of May 13. The largest funds in this category are iShares MSCI USA Minimum Volatility and PowerShares S&P 500 Low Volatility. 

These ETFs aim to provide similar returns to the U.S. stock market, while at the same time taking on less risk. Obviously, that's an appealing concept for investors, especially after the January sell-off. Investors are still seeking exposure to U.S. equities, but are less willing to put up with the market's erratic ups and downs. 

Alina Lamy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.