A Framework for Evaluating Low-Volatility Funds

There are five important investment process questions to ask before buying a low-volatility fund.

Jul 18, 2018

Mentioned: Invesco S&P 500® Low Volatility ETF (SPLV) , iShares Edge MSCI Min Vol USA ETF (USMV) , AQR Large Cap Defensive Style I (AUEIX) , SPDR® SSGA US Large Cap Low Volatil ETF (LGLV) , Fidelity® Low Volatility Factor ETF (FDLO) , Vanguard US Minimum Volatility ETF (VFMV)

A version of this article was published in the May 2018 issue of Morningstar ETFInvestor. Download a complimentary copy of Morningstar ETFInvestor by visiting the website.

Well-constructed low-volatility stock funds should offer better downside protection, a smoother ride, and better risk-adjusted performance than the market over the long term. But not all low-volatility funds are created equal. Differences in how they are constructed can affect performance and their odds of success. It's important to have a strong framework to evaluate how these funds are built.

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

A Framework for Evaluating Low-Volatility Funds

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