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
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
Fidelity Canada Low Volatility Index ETFs
Fidelity for value factor-based investment strategy
At Fidelity, our value factor funds seek to track the performance of tailor-made indexes that are actively designed. The Fidelity Canada Value Factor Index is designed to reflect the performance of stocks that have attractive valuations. Typically, cheap stocks, with low prices relative to fundamentals, have historically outperformed the market over time.
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
ETF education centre
Gain a deeper understanding of factor investing at the Fidelity education centre.