While low-volatility plays may perform well during volatile market conditions, the low-volatility strategy may not perform as well in strong short-term rallies since the strategy selectively excludes riskier securities that would benefit during bullish conditions.
Investors trying to limit portfolio swings have been drawn to low-volatility and dividend-themed ETFs. [Low-Volatility ETFs vs. Dividend ETFs]
For example, skittish investors looking for strategies that take a more cautious approach in the stock market added more than $1 billion to low-volatility ETFs in the third quarter. [Low-Volatility ETFs: Boring is Beautiful]
The iShares High Dividend Equity Fund (NYSEArca: HDV) is an example of an ETF designed to combine dividend and low-volatility stocks.
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Max Chen contributed to this article.