Low volatility – or low rates?

Tracker funds investing in “boring” stocks have done well in the past 25 years – but is that set to change?

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Utility companies feature prominently in low-vol portfolios
(Image credit: scyther5)

One big winner from the post-financial crisis environment has been "low volatility" ("low-vol") exchange-traded funds (ETFs). The idea behind these ETFs (part of a range of "smart beta" ETFs that invest in indices with specific themes or theories backing them) is that they are full of equities that are less volatile (ie they suffer fewer ups and downs) than the wider stock market. As a result, they should give investors a smoother ride overall the highs might not be as high, but nor will the lows be as severe and as frightening. And so far it seems they have largely done their job.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.