“Low-volatility stocks have historically offered higher risk-adjusted returns than their more-volatile counterparts, suggesting that the market has not offered adequate compensation for incremental risk,” according to Morningstar analyst Michael Rawson.
ETF investors can also take the low volatility theme to overseas markets. The low-volatility ETFs have helped soften the blow from the global sell-off. For example, the the PowerShares S&P International Developed Low Volatility Portfolio (NYSEArca: IDLV) and iShares MSCI EAFE Minimum Volatility ETF (NYSEArca: EFAV) provide a low-volatile option for developed overseas markets. Over the past month, IDLV dipped 2.8% and EFAV fell 1.4% while the iShares MSCI EAFE ETF (NYSEArca: EFA) declined 2.9%.
Additionally, investors can target emerging market exposure through the iShares MSCI Emerging Markets Minimum Volatility ETF (NYSEArca: EEMV) and PowerShares S&P Emerging Markets Low Volatility Portfolio (NYSEArca: EELV). Over the past month, EELV was down 3.4% and EELV was 3.1% lower while the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) retreated 5.2%.
For more information on low vol strategies, visit our low-volatility category.
Max Chen contributed to this article.