Managing Uncertainty

In a previous blog, we discussed “volatility fear Index (VIX)” and how we can use it to manage and hedge some of our portfolio exposures. There is another investment option that can be used to dampen the volatility while maintain investing during a market downturn: Low Volatility Fund.

If you are an ETF investor, there are over 20+ low volatility index ETF to pick from. Below are some examples:

There are less choices if you can only purchase mutual fund

While it is a choice to reduce volatility, the trade-off is on the performance. Here is an example of comparing S&P 500 index vs Fidelity SAI U.S. Low Volatility Index Fund (FSUVX).

From Jan 2016 – Sep 2020, here is the comparison

SPYFSUVX
CAGR13.20%12.26%
Stdev14.75%12.10%
Best Year31.22%27.70%
Worst Year-4.56%1.39%
Sharpe Ratio0.840.92
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