
6 Tips for Trading ETFs in Volatile Markets
Learn about our six best practices for trading ETFs during market volatility and uncertain times.
Discover how each factor performs in different market environments and gain helpful insights from our investment teams.
Learn how to harness the low volatility anomaly.2
“More risk equals more return” – this is a common misperception among investors. While highly volatile stocks may indeed deliver bursts of impressive performance, academic research1 has found that lower-volatility stocks have historically generated better risk-adjusted returns over time. This is known as the “low volatility anomaly,2” and it’s the reason why many long-term investors have included Low Volatility factor strategies in their portfolios.
Factors are measurable characteristics of a security that help explain its performance. The Low Volatility factor applies to the stocks that have been the least volatile in their asset class over time — avoiding the sharper ups and downs of other stocks.
There are several reasons why the Low Volatility factor has the potential to outperform the broad market over the long term:
Simple math tells us that the more a stock’s price falls, the more it has to gain just to get back to even.
While volatility can fuel spikes in a stock’s price, it can result in plunges as well. Over the long term, it can be harder for a high volatility stock to make back what it’s lost.
Discover how each factor performs in different market environments and gain helpful insights from our investment teams.
6 Tips for Trading ETFs in Volatile Markets
Learn about our six best practices for trading ETFs during market volatility and uncertain times.
Don't Overreact
Trying to time the market may do more long-term damage to your portfolio than any short-term market decline.
Using Low Volatility ETFs to Complement Your Portfolio
Combining a low-volatility ETF with your other holdings could potentially maximize the performance of your overall portfolio.