Low-volatility investing focuses on providing returns similar to the broader market over time with less volatility — a smoother ride. Stocks with stable revenues and earnings are also less susceptible to recessions and other macroeconomic events. Low-volatility stocks tend to hold up better when markets decline rapidly, but they may lag during strong market rallies.
What is a low-volatility factor?
The low volatility factor targets securities with lower risk than the broader market, as well as stable earnings. They have historically produced higher risk-adjusted returns over time.
- Typically defined as price volatility
- Common ways to measure volatility is to screen for stocks based on the historical volatility of their prices and earnings
Why does it matter?
Investors seek returns similar to those of the market over time, but desire more consistency, making low volatility a compelling factor
During market declines, low-volatility portfolios tend to experience smaller drawdowns, providing the benefit of compounding positive excess returns
The benefits of the lower-volatility approach can also be achieved by investing in companies with more stable fundamentals, which are less susceptible to declines during recessions and other macroeconomic events
Fidelity Canada Low Volatility Index ETFs
Fidelity Canadian Low Volatility Index ETF
Fidelity U.S. Low Volatility Index ETF
Fidelity U.S. Low Volatility Index ETF - US$
Fidelity U.S. Low Volatility Currency Neutral Index ETF
Fidelity International Low Volatility Index ETF
Also available as mutual funds which will invest in the underlying ETFs:
Fidelity for low volatility factor-based investment strategy
At Fidelity, our low volatility factor funds seek to track the performance of tailor-made indexes that are actively designed. The Fidelity Canada Low Volatility Factor Index is designed to reflect the performance of stocks with lower volatility than the broader market. Typically, securities with lower risk than the broader market have historically produced higher risk-adjusted returns.
Single-factor exposure to companies with lower volatility than the broader equity market
An outcome-oriented approach that seeks to provide market-like returns with lower volatility
An efficient complement to a well-diversified portfolio