Low volatility funds seek to achieve the overall performance of some basket of stocks, like an index, but with lower variability over time.
This insight is fundamental to the way we develop and manage
TD Low Volatility Funds that each aim to deliver competitive returns with more stability than traditional mutual fund investments.
In general, experts says, investors
in low volatility funds can expect more muted losses in down markets but also more modest gains during up markets, leading to roughly comparable returns over the long term.
Dr. Masson is the portfolio manager for the TD Canadian Low Volatility Class and the TD
Global Low Volatility Fund, as well as two institutional funds based on similar strategies.
Those who have a higher risk tolerance would like an inverse ETF as a hedge, otherwise, swapping more volatile stocks
for low volatility funds or bond funds make for a great way to take some risk off the table when valuations exceed your comfort zone.
While low volatility funds, such as the PowerShares S&P 500 Low Volatility Portfolio (NYSE: SPLV), are among the most popular smart beta strategies,...
With innovative solutions like the new TD Risk Managed Equity Funds, TD Retirement Portfolios, and
TD Low Volatility Funds, investors have the potential for both, from a leader in low volatility strategies, TD Asset Management.
Low volatility funds can exhibit relative low volatility and excess returns compared to the Index over the long term; both portfolio investments and returns may differ from those of the Index.
Rea Fair enough, I still think this isn't the «optimal procedure,» all you need for this to work is
a low volatility fund that trades in both currencies.
But there are other options as well, investors today have options of actively managed funds, currency - hedged funds,
low volatility funds, dividend funds and even factor based emerging market funds.
Of course the premise of
any low volatility fund is to pick securities that have been less volatile in the past, no guarantee that performance continues in the future.
These are
low volatility funds and they provide reasonable returns with high liquidity.
At several points in their history,
low volatility funds have even outperformed the market, contrary to what academic finance would leave you to believe.
The C2 Flagship Fund,
a low volatility fund, had profitable audited performance for 8 of 9 years (before fees) including being profitable in 2008.
So,
these low volatility funds like to hold low beta stocks in order to help reduce the volatility of the investor's portfolio.
Investors have been piling into the types of companies held in
these lower volatility funds.
Most importantly, what about the performance difference between
this low volatility fund and the general market?
As
the low volatility funds grow they need to invest more into the stocks which aren't volatile.
With all the cash flowing into
the low volatility funds and then the funds buying more of the same stocks, the stock price of these companies gets driven up.
Retail investors are flocking to
these low volatility funds to quell their fears of investing losses, even though they are getting a pretty minimal decrease in actual volatility.
For example, investing and finance companies invented so - called «
low volatility funds» within the last ten years, and these funds have become popular.
At least at present, until
the low volatility funds get too big, there seems to be an anomaly where low volatility equity investing beats high volatility equity investing.
With TD
Low Volatility Funds, you can potentially benefit from a reduced level of volatility in your overall portfolio, a more predictable return outcome when compared to traditional equity mutual funds, and with the option of Canadian, US, global, or emerging market low volatility funds, you can tailor a diversified portfolio based on your level of risk and investment goals.