7 Best Low-Volatility Stocks to Buy

The best low-volatility stocks help investors hedge during broad-market downturns.

flat stones on calm water with green leaf on top
(Image credit: Getty Images)

Low-volatility stocks are ports in a storm for investors who can't stomach violent market swings. Their relatively tranquil behavior can not only help reduce losses in a downturn – they can stay your hand, preventing you from panic selling and potentially ruining your retirement.

Now, the market is consolidating gains to start the new year following a big run higher in 2023, though the pullback has been modest. However, I'm sorry to say low-vol stocks still might be of use this year, for several reasons.

"The equity and bond markets appear to be pricing in quickly falling inflation and a Federal Reserve that cuts rates potentially six times this year, all followed by an economic recovery in the second half of the year that allows the earnings growth rate for the S&P 500 Index to exceed 10% in 2024 relative to last year," says Scott Wren, senior global market strategist at Wells Fargo Investment Institute. 

While each of those certainly has some chance of occurring, "we think the 'Street' is overly optimistic in betting that such a rosy outcome is likely," Wren adds. "In other words, we think it is wise for investors to expect some giveback in equities and some volatility in bonds, particularly in the first half of this year, before brighter economic skies become more apparent in the second half and as we head into 2025."

But that's the risk you take with these strategies, including with equities and low-volatility ETFs. If you hold low-vol stocks and chaos arrives, chances are they'll buoy your performance – but if there's no tumult and stocks broadly ascend, those low-vol holdings could lag.

S&P Global conducted a study of the S&P 500 low-volatility and high-beta indices, including 10 years of backtested performance before their founding in April 2011, and a little more than 10 years of live performance after that. It found that low volatility outperformed by the most, and most often, in the worst market environments; as market environments improved, it outperformed less frequently and its performance differentials declined.

If you're aware of (and OK with) this risk, however, low-vol stocks can be a useful addition to your portfolio.

Read on as we look at seven low-volatility stocks to buy now. The following stocks all sport low "beta" – a measurement of how volatile an investment is to a relevant benchmark. If a stock has a beta of less than 1.0, for instance, that theoretically means it's less volatile than the S&P 500; if it's greater than 1.0, the stock is more volatile. They also enjoy high ratings from Wall Street analysts and deliver above-average dividends, which can help boost performance when price gains are lacking.

Disclaimer

Data is as of January 18. Average price targets and analyst ratings provided by S&P Global Market Intelligence. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

Kyle Woodley

Kyle Woodley is the Editor-in-Chief of WealthUp, a site dedicated to improving the personal finances and financial literacy of people of all ages. He also writes the weekly The Weekend Tea newsletter, which covers both news and analysis about spending, saving, investing, the economy and more.


Kyle was previously the Senior Investing Editor for Kiplinger.com, and the Managing Editor for InvestorPlace.com before that. His work has appeared in several outlets, including Yahoo! Finance, MSN Money, Barchart, The Globe & Mail and the Nasdaq. He also has appeared as a guest on Fox Business Network and Money Radio, among other shows and podcasts, and he has been quoted in several outlets, including MarketWatch, Vice and Univision. He is a proud graduate of The Ohio State University, where he earned a BA in journalism. 


You can check out his thoughts on the markets (and more) at @KyleWoodley.