Low-volatility funds, which aim to offer a smoother ride, are living up to their name.
Since the start of the year, U.S. stock funds with low-volatility strategies have dipped 7.7% on average, while the S&P 500 Index has lost 13.1%. The Legg Mason Low Volatility High Dividend ETF (LVHD) has held up better than both, with a 2.2% loss.
The fund is flourishing in an economic environment of higher inflation and rising interest rates. It tracks an index that favors high-quality firms with above-average dividend yields that have steady and ample profits to sustain payouts, as well as low share-price volatility.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"We want to be boring and find mature companies with predictable earnings," says Michael LaBella, a senior portfolio manager for fund sponsor Franklin Templeton Investment Solutions.
The portfolio tilts toward utilities, consumer staples and real estate stocks. But no sector can make up more than 25% of assets. And the fund's sector preferences can shift. Lockheed Martin (LMT), Coca-Cola (KO) and Johnson & Johnson (JNJ) are among the fund's biggest holdings.
Don't expect low-volatility funds to outperform every market correction. These funds lagged the S&P 500 in 2020, for instance. The Legg Mason Low Volatility High Dividend struggled because it shuns firms that lack earnings and dividends, and thus it didn't own the growthy, pandemic-themed stocks – think Zoom (ZM) – that were rewarded that year.
The ETF's 10.2% annualized three-year return lagged the S&P 500's, but over that time, the fund was 5% less volatile. It boasts a 3.06% dividend yield.
-
These Stocks Dipped in 2025. Do They Have Value?If you are looking to add new long-term positions to your portfolio, as you should, this is the time to examine stocks that the market shuns.
-
Striking Gold (or Gas): A Financial Pro Unpacks the Nuances of Energy InvestingInvesting in the energy industry, particularly oil and gas, involves understanding the facts about how projects generate returns through cash flow and long-term asset building, while also being aware of the risks.
-
Dow Adds 238 Points as UNH, CAT Pop: Stock Market TodayThe lack of a September jobs report didn't seem to worry market participants, with the data delayed due to the ongoing government shutdown.
-
Stocks at New Highs as Shutdown Drags On: Stock Market TodayThe Nasdaq Composite, S&P 500 and Dow Jones Industrial Average all notched new record closes Thursday as tech stocks gained.
-
S&P 500 Sees New Highs on Shutdown Day: Stock Market TodayMost of its components were in the red, but the S&P 500 Index still managed to hit a new intraday all-time high.
-
Stocks Close September on a High Note: Stock Market TodayA little bit of late risk-on behavior was enough to lift stocks into the green on the last day of September.
-
Investors Take Stock of Shutdown Talk: Stock Market TodayWhether we'll have a Jobs Friday this week depends on if we have a government shutdown in Washington.
-
Dow Adds 300 Points, Ends Losing Streak: Stock Market TodayThe Dow, the S&P 500 and the Nasdaq head into the weekend on high notes after posting gains for the first time since Monday.
-
Stocks Are Down for a Third Straight Day: Stock Market TodayStocks have come a long way in a short time since April and remain near all-time highs as the end of the third quarter approaches.
-
Stocks Fall Again as Big Tech Struggles: Stock Market TodayThe economic calendar was a bright spot for Wall Street Wednesday, with new home sales climbing to a three-year high.
