Low Volatility Investing

Low vol investing is based on the idea that, over the long-term, stocks with lower volatility tend to outperform those with higher volatility.


In recent years, a new investing strategy has gained popularity: low volatility investing.

This strategy is based on the idea that, over the long-term, stocks with lower volatility (i.e. less ups and downs) tend to outperform those with higher volatility.

There are a number of reasons why this may be the case.

One is that investors tend to overreact to both good and bad news, meaning that stocks with lower volatility are less likely to be overpriced (or underpriced).

Another reason is that low volatility stocks tend to be more diversified, and thus less risky.

There are a number of ways to implement a low volatility investing strategy.

  1. Simply invest in low volatility ETFs like SPLV. 
  2. Another is to construct a portfolio of low volatility stocks. This can be done by screening for stocks with low beta (i.e. those that move less than the market as a whole) or by looking at other measures of volatility (i.e. low standard deviation of stock price).

Whichever approach you take, low volatility investing can be a great way to boost your long-term returns while minimizing risk.

Looking for to get started with low vol investing?

Check out Investipal. We screen on the low volatility factor and return ETFs within this bucket.

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