12 Low-Volatility Stocks to Stabilize Your Portfolio

Have a look at a dozen low-volatility stocks, many paying rich dividends, that make worthy additions to any defensive investment portfolio.

(Image credit: Getty Images)

The stock market suffered a turbulent September, and a number of factors are pointing toward an equally bumpy rest of the year. That likely will have investors looking for a smoother market ride than what the major indices have to offer – and one such way to do that is to buy low-volatility stocks to manage risk.

The upcoming presidential election is a massive point of uncertainty, but it's hardly the only one. The potential for a "second wave" of COVID-19, the state of the U.S. economy, and Chinese relations are all making themselves heard, as well. Most of these factors could continue to haunt U.S. stocks through the end of 2020 – even the presidential election, if the results are contested.

Low-volatility strategies are designed to limit losses during periods of market decline while still allowing for upside. They surged in popularity following the stock market meltdown triggered by the 2008 crisis, and they've long proven able to outperform their benchmarks over long periods. For example, between December 1990 and December 2019, the S&P 500 Low Volatility Index produced a 10.9% average annual return, versus 10.2% for the index itself. The low-vol index also had a return/risk of 0.85 versus 0.58 for the plain index. Extending this history to the 1970s shows a similar risk-return profile.

Just don't consider low-volatility stocks a panacea for whatever ails the market. Over shorter time periods, low-vol stocks have sometimes underperformed, including in 2020. One reason for this is unusual circumstances triggered by the COVID-19 lockdown, which has caused traditionally safe sectors like real estate and utilities to tank as credit markets froze and turned riskier industries (like technology, which could operate remotely, and biotech, which sought answers for COVID-19) into safe havens.

Rather than a single weapon that minimizes losses in every single downturn, investors should look at low-volatility stocks as part of an overall long-term diversification strategy for smoothing market peaks and valleys and bolstering returns over longer periods by losing less. In looking for low-volatility stocks, we've screened the market for stocks that have a low beta – a measure of volatility in which a benchmark is set at 1.0, so stocks with a beta of less than 1.0 are theoretically less volatile than the S&P 500 – over the past two years.

Read on as we examine a dozen low-volatility stocks, many paying rich dividends, that make worthy additions to any defensive investment portfolio.


Data is as of Oct. 1. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price. Stocks listed in order of beta, from highest to lowest (a lower beta means a stock is theoretically less volatile).

Lisa Springer
Contributing Writer, Kiplinger.com

Lisa currently serves as an equity research analyst for Singular Research covering small-cap healthcare, medical device and broadcast media stocks.