The 3 Best Low Volatility ETFs To Mitigate Stock Risk and Capture the Low Volatility Factor

Low volatility ETFs provide a way for investors to stay in stocks while still limiting portfolio volatility and risk. Here we’ll look at the best low volatility ETFs to access stocks with less movement. // TIMESTAMPS: 00:00 - Intro 00:25 - Why low volatility stocks? 03:18 - USMV 03:54 - SPLV 04:44 - EFAV 05:14 - Where to buy these ETFs Read the blog post here: www.optimizedportfolio.com/best-low-volatility-etf… // PARTIAL TRANSCRIPT: Low volatility stocks refer to stocks with lower-than-average price movement. Theoretically, low volatility stocks should fall less than the broader market when the market drops and rise less than the broader market when the market rises, thereby muting peaks and valleys. Interestingly though, history has told a slightly different story that has favored the upside. Traditional wisdom, and specifically, the capital asset pricing model or CAPM, maintains that there should be a positive relationship between stock risk and return. That is, over sufficiently long investing horizons, more risk should provide the potential for more reward. It should follow that higher-volatility stocks should provide higher returns, but empirical evidence has shown that relationship to be largely flat and sometimes even negative. This is known as the “low volatility anomaly.” In short, defensive, low-volatility stocks have historically delivered higher returns than the most volatile stocks. The low volatility factor has been pervasive across geographies and asset types for the past 90+ years. ETFs have emerged based on the low volatility factor to provide investors with a vehicle to limit downside movement without picking individual stocks. Investors should note, however, that the sector weightings of these low volatility ETFs may not match that of the broader market, as exposure to higher-volatility stocks and sectors is eliminated or reduced. My suggested low volatility ETFs are: USMV SPLV EFAV All of these low volatility ETFs should be available at any major broker. My choice is M1 Finance. I’ll provide a link below to my comprehensive review of M1. #investing #etfs #stocks #stockmarket References: www.sciencedirect.com/science/article/abs/pii/S030… www.tandfonline.com/doi/abs/10.2469/faj.v67.n1.4 link.springer.com/article/10.1057/s41260-016-0036-… thebamalliance.com/blog/low-volatility-advantage-n… papers.ssrn.com/sol3/papers.cfm?abstract_id=344274… papers.ssrn.com/sol3/papers.cfm?abstract_id=980865 papers.ssrn.com/sol3/papers.cfm?abstract_id=205543… jpm.pm-research.com/content/40/3/61 Ben Felix on why low volatility ETFs may not be the best implementation vehicle if your goals are market outperformance and broad diversification:    • Low Volatility - Low Beta ETFs   // INVEST ► M1 Finance: optimizedportfolio.com/go/m1 ► My comprehensive review of M1 Finance: www.optimizedportfolio.com/m1-finance-review/ ► Get my dividend portfolio: www.optimizedportfolio.com/m1-finance-dividend-pie… ► Lazy Portfolios: www.optimizedportfolio.com/lazy-portfolios/ ► Beginners’ reference guide (updated regularly): www.optimizedportfolio.com/beginners-start-here/ ► Webull (for stock traders; get 2 free stocks): act.webull.com/te/iKJHc5TS9HSe/lfh/inviteUs/ ► Robinhood (1 free stock): robinhood.c3me6x.net/DVyo4o // SOCIAL ► Website: www.optimizedportfolio.com/ ► Patreon: www.patreon.com/optimizedportfolio ► Instagram: www.instagram.com/optimizedportfolio/ ► Twitter: twitter.com/OptimizedPort ► Support my channel by shopping on Amazon (free for you): amzn.to/2TLCgCc I appreciate all the support! DISCLAIMER: While I love diving into investing-related data and playing around with backtests, I am not a certified expert. I am not a financial advisor, portfolio manager, or accountant. The information presented is not financial advice, investing advice, or tax advice; it is for informational and recreational purposes only. Investment products discussed are for illustrative purposes only. It is not a recommendation to buy, sell, or transact in any of the products mentioned. I try my best to provide accurate information, but I can’t guarantee 100% accuracy. Do your own due diligence. Read my lengthier disclaimer here: www.optimizedportfolio.com/terms/ DISCLOSURE: Some of the links above are referral links. At no additional cost to you, if you choose to make a purchase or sign up for a service after clicking through those links, I may receive a small commission. This allows me to continue producing high-quality content on this channel and pays for the occasional cup of coffee. I have first-hand experience with every product or service I recommend, and I recommend them because I genuinely believe they are useful. Business inquiries: Send an email to optimizedportfolio1[at]gmail[dot]com

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