Skip to Content
Our Picks

10 Undervalued Low-Volatility Stocks

These stocks could offer higher reward with lower risk.

Mentioned: , , , , , , , , ,

It's a little bit of a paradox: Data has shown that over the medium and long term, stocks that are less volatile actually earn higher risk-adjusted returns than stocks that are highly volatile. So why would want anyone invest in high-volatility stocks? Investors in low-volatility funds and ETFs would say you needn't bother.

The idea behind "low-vol" strategies is to screen a universe of stocks by criteria that allows you to capitalize on this low-volatility anomaly. Some indexes screen out highly volatile stocks as measured by standard deviation, while others employ more complicated algorithms that go beyond individual stock volatility to see how stocks interact with each other. Some implement rules to prevent overweights to less volatile sectors such as consumer defensives and utilities.

To view this article, become a Morningstar Basic member.

Register for Free

Karen Wallace does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.