5 Low-Volatility ETFs to Buy Now

Over the 33 years from 1993 to 2026, the SPDR S&P 500 ETF (SPY) delivered a cumulative return of roughly 2,770% with dividends reinvested, or about 10.7% annualized before inflation and taxes.

That figure lines up with what many investors treat as a long-run benchmark for U.S. equities. But focusing on returns alone ignores the amount of risk required to earn them. Over that same period, annual volatility for the S&P 500 as measured by the Cboe Volatility Index (VIX) sat near 18.6%, meaning sizable year-to-year swings in the market's "fear index" were the norm.

For a small portfolio, those moves may feel manageable. For larger balances, they can translate into dollar swings that rival or exceed annual income.

More importantly, volatility understates the psychological challenge of investing through severe drawdowns. During the global financial crisis, the S&P 500 fell more than 55% from peak to trough, and investors who bought before the downturn did not fully recover for roughly five years.

investor walks cautiously on a tightrope

These experiences explain why many investors, especially those with lower risk tolerance or shorter time horizons, look beyond pure equity exposure. Some seek diversification with bonds. Others use options-based hedging strategies that trade upside for downside protection.

Another approach is low-volatility equity ETFs. Rather than owning the entire market, these funds systematically select stocks that have historically shown lower price swings, with the goal of reducing drawdowns and smoothing the ride through market cycles.

Low-volatility ETFs fall under the broader umbrella of factor, or "smart beta," investing. Like value and growth as well as quality or momentum strategies, they target a specific characteristic believed to influence risk and return. The challenge is that "low volatility" can be defined and implemented in very different ways, and not all approaches work equally well.

Here's what you need to understand before choosing a low-volatility ETF in 2026, along with the options we think are worth considering.

What is the low-volatility anomaly?

Investing is not physics. While many finance theories aim to establish clean, rules-based relationships between risk and return, their conclusions are always shaped by the data, assumptions and market regimes in which they were developed.

The low-volatility anomaly is a good example of how real-world markets can behave in ways that contradict traditional theory.

Under classical financial thinking, particularly the Capital Asset Pricing Model, investors are expected to earn higher returns only by taking on more risk. Higher volatility should imply higher expected returns, and safer assets should offer lower returns.

Empirical research, however, found the opposite in many markets. Over long periods, stocks with the lowest volatility not only experienced smaller drawdowns, but in many cases delivered higher risk-adjusted returns and even outperformed broader market benchmarks.

This persistent contradiction became known as the "low-volatility anomaly," and eventually evolved into what investors now refer to as the low-volatility factor. Since then, researchers have proposed several explanations for why low-volatility stocks may outperform.

Leverage constraints may be a cause. Large institutional investors that are unable or unwilling to use leverage often chase higher-risk stocks in an attempt to boost returns, pushing their prices up and future returns down. Lower-volatility stocks are ignored in this process and may remain undervalued.

Behavioral biases could play a role, too. Investors are often drawn to "lottery-like" stocks with high volatility and the chance of outsized gains, even if the odds are poor. This preference can lead to systematic overpricing of volatile stocks and underpricing of stable ones.

Institutional incentives can also distort outcomes. Many professional managers are benchmarked to market indexes and are penalized for underperforming in rising markets. This can encourage them to favor higher-beta stocks, even if those stocks deliver worse long-term results.

Regardless of the underlying cause, index providers have been quick to translate this research into investable products. Most low-volatility ETFs use rules-based approaches to identify a subset of stocks expected to exhibit lower price swings than the broader market. How they do this varies widely.

Some strategies rely on historical volatility, selecting stocks with the lowest realized fluctuations over a defined lookback period. Others attempt to estimate future volatility using statistical forecasts. Rebalancing frequency can also vary. These design choices can materially affect outcomes.

Many impose sector constraints to avoid excessive concentration in traditionally defensive sectors such as utility stocks, consumer staples or health care stocks. Others differ by geography, focusing on U.S. markets, developed international markets or emerging markets.

One final distinction is important. Low-volatility investing is not the same as minimum volatility or minimum variance investing. Both approaches aim to dampen risk and reduce the impact of a down market, but they arrive there through different mechanisms.

The latter is a portfolio-level optimization approach that focuses on minimizing overall portfolio risk. In these strategies, an individual stock doesn't need to be "low volatility" on its own. Instead, its correlation with other holdings may help reduce total portfolio variance when combined appropriately.

How we selected the best low-volatility ETFs

The first thing we focused on was not how each low volatility strategy was executed, but whether the ETF itself was appropriately structured. A sound structure matters because even a well-designed factor strategy can fail to deliver if it's burdened by high costs, low assets or poor transparency.

To start, we limited our selection to ETFs with at least $1 billion in assets under management (AUM). This threshold helps ensure institutional viability and minimizes the risk of fund closure, which can be disruptive for investors and create unintended tax consequences.

We also capped expense ratios at 0.3% or lower. Fees are especially important for low-volatility strategies, because excess costs can easily overwhelm any potential premium or risk reduction achieved relative to a simple market-cap-weighted index.

Next, we restricted our list to index-based ETFs. Transparency is critical when evaluating a low-volatility strategy. Investors should be able to review the index methodology and clearly understand how volatility is defined, which metrics are used, how stocks are selected, how often the portfolio is rebalanced and how constituents are added or removed.

profit from both rising and falling markets

While active ETFs can offer the potential for outperformance, they are often more expensive and rely on opaque processes. There is also the risk of style drift, where a fund's approach changes over time due to management turnover or shifting mandates.

We also ensured that low volatility was the primary factor driving each ETF's construction. Some funds screen for low volatility but also layer in other factors such as quality, value, or dividend yield. These characteristics can be complementary, but for inclusion in this list, low volatility needed to be the dominant selection criterion rather than a byproduct of another strategy.

Finally, for each ETF, we examined its historical beta and standard deviation relative to an appropriate market benchmark via a back test from Testfolio.

Beta measures how sensitive an ETF is to broad market movements, while standard deviation captures the variability of returns over time.

Invesco S&P 500 Low Volatility ETF

Assets under management: $7.4 billion
Expense ratio: 0.25%
5-year annualized total return: 7.07%

The Invesco S&P 500 Low Volatility ETF (SPLV) offers a straightforward proposition. It starts with the S&P 500 universe and selects the 100 stocks with the lowest trailing one-year volatility.

Instead of weighting holdings by market cap, the fund weights them by the inverse of their volatility. In practice, this means stocks with lower historical price swings receive larger allocations.

This construction naturally tilts the portfolio toward defensive sectors such as utilities, consumer staples stocks and health care. The top holdings reflect this defensive bias and include established blue chip stocks such as Waste Management (WM), Johnson & Johnson (JNJ), Coca-Cola (KO) and McDonald's (MCD).

Over the nearly 15-year period from May 5, 2011, to January 28, 2026, SPLV delivered meaningfully lower market sensitivity, with a beta of 0.70 vs the SPDR S&P 500 ETF and lower annualized volatility at 14.59% compared with 17.24% for the broader market proxy.

Learn more about SPLV at the Invesco provider site.

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Invesco S&P 500 High Dividend Low Volatility ETF

Assets under management: $3.1 billion
Expense ratio: 0.30%
5-year annualized total return: 9.21%

The Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) starts with the S&P 500 and selects 50 stocks based on two criteria: high dividend yield and low trailing one-year volatility.

Unlike SPLV, which weights holdings by the inverse of volatility, SPHD weights its constituents by dividend yield. This design tilts the portfolio toward companies that not only exhibit lower price swings but also generate meaningful cash income.

The index methodology also adds diversification guardrails. No more than 10 stocks can be selected from any one of the 11 GICS sectors. Sector exposure is capped at 25%, and individual stock weights are capped at 3%. These constraints help prevent the portfolio from becoming overly concentrated in traditional high-yield sectors such as utilities or energy.

The income profile is notable. Morningstar currently reports a 4.83% 30-day SEC yield, which exceeds the prevailing federal funds rate and makes SPHD attractive for income-focused investors who still want an element of downside risk control.

Over a roughly 10-year back test from October 22, 2014, to January 28, 2026, SPHD posted a beta of 0.76 vs 0.87 for the State Street SPDR Portfolio S&P 500 High Dividend ETF (SPYD), which doesn't screen for low volatility. Annualized volatility was also lower at 17.60% vs 19.79%.

Learn more about SPHD at the Invesco provider site.

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State Street SPDR U.S. Large Cap Low Volatility Index ETF

Assets under management: $1.1 billion
Expense ratio: 0.12%
Five-year annualized total return: 10.05%

The State Street SPDR U.S. Large Cap Low Volatility ETF (LGLV) is State Street's answer to Invesco's SPLV. Rather than drawing exclusively from the S&P 500, LGLV tracks the proprietary State Street U.S. Large Cap Low Volatility Index.

Its selection universe consists of the 1,000 largest U.S.-listed companies by market capitalization. From that group, the index systematically over-weights stocks with lower historical volatility, subject to liquidity and investability constraints.

One important nuance is the index history. Prior to December 13, 2016, LGLV tracked the Russell 1000 Low Volatility Index. After that date, it transitioned to State Street's proprietary benchmark. Because of this change, investors should be cautious about extrapolating long-term historical returns.

Over a nearly 13-year back test from February 21, 2013, to January 28, 2026, LGLV recorded a beta of 0.76, compared with a beta of 1.0 for SPY. Annualized volatility over that period was also lower at 15.29%, vs 16.96% for SPY.

Learn more about LGLV at the State Street provider site.

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Fidelity Low Volatility Factor ETF

Assets under management: $1.5 billion
Expense ratio: 0.15%
Five-year annualized total return: 10.89%

The Fidelity Low Volatility Factor ETF (FDLO) is Fidelity's take on low-volatility investing. It tracks the proprietary Fidelity U.S. Low Volatility Factor Index, which screens for large-cap stocks and mid-cap stocks based in the U.S. with lower volatility relative to the broader market. In practice, this results in a portfolio of roughly 130 holdings.

What sets FDLO apart from more traditional low-volatility ETFs is its sector-neutral design. Instead of allowing defensive stocks such as utilities or consumer staples to dominate the portfolio, the index targets sector weights that remain broadly aligned with the overall market. This helps reduce unintended sector bets and makes the ETF easier to pair with a core equity allocation.

FDLO also incorporates additional fundamental screens, including profitability and historical earnings growth. These inputs are designed to improve upside capture compared with strategies that rely solely on volatility metrics, which can sometimes overweight slow-growing or capital-intensive businesses.

Over a roughly nine-year period from September 15, 2016, to January 28, 2026, FDLO recorded a beta of 0.82 vs SPY's beta of 1.0. Realized annualized volatility over that span came in lower at 15.68%, compared with 18.20% for SPY.

Learn more about FDLO at the Fidelity Investments provider site.

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Goldman Sachs ActiveBeta World Low Vol Plus Equity ETF

Assets under management: $1.6 billion
Expense ratio: 0.25%
Three-year annualized total return: 16.83%

The Goldman Sachs ActiveBeta World Low Vol Plus Equity ETF (GLOV) is a relatively newer entrant in the low volatility ETF space, and it takes a more sophisticated approach than many of its peers. The fund tracks the proprietary Goldman Sachs ActiveBeta World Low Vol Plus Equity Index, which layers multiple factor screens on top of a low-volatility foundation.

In addition to targeting stocks with lower historical volatility, the index also screens for undervaluation, strong momentum and high quality characteristics, making this a more holistic factor strategy rather than a pure volatility play.

Another key differentiator is its global scope. Unlike most low-volatility ETFs that focus exclusively on U.S. equities, GLOV has exposure across developed markets and international equities. This includes countries such as Japan, Canada, the United Kingdom, Australia, Germany, France, Switzerland, the Netherlands and Italy.

Over the nearly four-year period from March 17, 2022, to January 28, 2026, GLOV recorded a beta of 0.66 vs 0.92 for the iShares MSCI World ETF (URTH). Over the same period, GLOV's realized annualized volatility came in at 12.79%, compared with 16.56% for URTH.

Learn more about GLOV at the Goldman Sachs provider site.

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Tony started investing during the 2017 marijuana stock bubble. After incurring some hilarious losses on various poor stock picks, he now adheres to Bogleheads-style passive investing strategies using index ETFs. Tony graduated in 2023 from Columbia University with a Master's degree in risk management. He holds the Certified ETF Advisor (CETF®) designation from The ETF Institute. Tony's work has also appeared in U.S. News & World Report, USA Today, ETF Central, The Motley Fool, TheStreet, and Benzinga. He is the founder of ETF Portfolio Blueprint.