Amid a turbulent start to 2016 for equities, investors looking to maintain long equity exposure are embracing low volatility exchange traded funds, such as the PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV) and the iShares MSCI USA Minimum Volatility ETF (NYSEArca: USMV).

Investors are being rewarded for the faith they are showing low volatility ETFs as SPLV and USMV are outpacing the S&P 500 on a year-to-date basis. Investors who still want a foot in the markets but are wary of further wild swings can use low-volatility ETFs that track equities and dampen swings. Due to their investment style, low-volatility stocks have also historically delivered better risk-adjusted returns than more aggressive and volatile picks.

Extensive research has gone over the so-called low-volatility anomaly. As a more conservative strategy, low-volatility investments are expected to provide investors with smaller swings and more boring returns. However, the strategy has historically outperformed with higher risk-adjusted returns.

“About $2.3 billion has flowed into these ETFs so far this year—a minor miracle, considering that equity ETFs as a whole have seen $23 billion flow out. The bulk of the new money has gone into the $8.1 billion iShares MSCI USA Minimum Volatility ETF (USMV), which aims to be a more sedate version of a U.S. large-cap stock index. The PowerShares S&P 500 Low Volatility Portfolio (SPLV), which simply holds the 100 least-volatile stocks in the Standard & Poor’s 500-stock index, has seen $120 million come in to boost assets to $5.5 billion,” reports Eric Balchunas for Bloomberg.

However, potential investors should be aware that since these ETFs focus more more slow and stable companies, the low volatility strategy may underperform more growth-oriented stocks if the markets turn around.

“We think the increased usage of USMV by institutional investors has been a positive for all investors,” said S&P Capital IQ. “The average daily trading volume in the past month spiked to 3.3 million, up from 2.0 million during the past six months. The bid/ask spread is $0.01, lower than most ETFs.”

PowerShares S&P 500 Low Volatility Portfolio

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.