A Framework for Evaluating Low-Volatility Funds
There are five important investment process questions to ask before buying a low-volatility fund.
ETF Specialist
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.
Alex Bryan has a position in the following securities mentioned above: USMV. Find out about Morningstar’s editorial policies.