These 3 Low- and Min-Vol ETFs Fend Off Market Jitters
Any time stocks start to struggle, the financial media begins to flood the zone with some choice words.
You'll see words like "correction" (a 10%-plus drop) if things are bad, or "bear market" (a 20%-plus drop) if things really start to deteriorate. These events are sometimes triggered by other alarming terms such as "recession" or, heaven forbid, "depression."
Of course, whenever you see any of the aforementioned words, you're likely going to spot a mention or two of "volatility." Volatility in and of itself isn't inherently good or bad, but when people start talking about it, it's usually because volatility is high—which makes for a difficult environment for most equities.
Today, then, we're going to talk about how investors can try to beat back high volatility.
What Is Volatility?
First, let's help any newcomers out by explaining what volatility is.
Rather than try to reinvent the wheel, we're just going to pluck a few definitions of volatility from across the web so you can get a concrete picture:
- Investopedia: "Volatility is how much and how quickly prices move over a given span of time."
- Wikipedia: "Volatility (usually denoted by "σ") is the degree of variation of a trading price series over time."
- Financial Industry Regulatory Authority (FINRA): "Some days market indexes and stock prices move up and other days they move down."
Three very different organizations. Three very similar definitions. (Though we're surprised the most conversational definition came from the regulatory organization. Good on you, FINRA writers.)
Anyhoo. Stocks go up. Stocks go down. That's volatility!
Why Don't We Like Volatility?
But when people say the market "is volatile," what they typically mean is that the market "is highly volatile." In other words, stocks are moving up and down rapidly.
And that—high volatility—is when things tend to turn sour for stocks.
As a general rule, if stocks spend a prolonged time moving up and down by more than 1% per day, your average market watcher would likely tell you that stocks are volatile.
That doesn't sound so bad in a bubble. Stocks could theoretically go down 1%, then up 3%, then down 1%, then up 3%, and hey, you'd have some nice gains in a volatile market. But that's rarely how it plays out in practice.
Crestmont Research evaluated S&P 500 Index data from 1962 through the end of 2025, measuring performance across four different quartiles of annual volatility. Here's a look at a few stats from each quartile (volatility range in parentheses):
- 1st Quartile (0%-1.0%): 94% chance of an up year, 18.2% average gain in up years, 1.5% average loss in down years, expected gain of 17.0%
- 2nd Quartile (1.0%-1.4%): 75% chance of an up year, 14.6% average gain in up years, 6.3% average loss in down years, expected gain of 9.4%
- 3rd Quartile (1.4%-1.7%): 88% chance of an up year, 17.3% average gain in up years, 5.9% average loss in down years, expected gain of 14.4%
- 4th Quartile (1.7%-2.7%): 38% chance of an up year, 15.1% average gain in up years, 18.6% average loss in down years, expected loss of 5.9%
It's not a perfect line. But broadly speaking, years with low volatility were more likely to be positive (and when they weren't, the damage was relatively more contained) than years with high volatility. Up years could be more productive during periods of relatively high volatility, but they were less productive when the markets were extremely volatile.
Young and the Invested Tip: Another way to hedge against wobbly markets is to hold high-yield dividend stocks whose payouts provide some buffer against share-price declines.
Why? The oversimplified but directionally correct answer is "markets hate uncertainty." Big swings up and down are an indication that investors aren't all on the same page about where stocks and other investments should be priced. It's also a risky environment in which to invest—people get a little skittish about the possibility of buying something that could lose 3% or 4% the very next day!
And that's why investors often look to volatility-reducing funds—they provide stability, and they can also help reduce losses.
Low- and Minimum-Volatility ETFs
While there are a handful of mutual funds designed to reduce volatility, there are many more choices in the exchange-traded fund (ETF) world, so the rest of our conversation will revolve around those. And ETFs designed explicitly to reduce volatility can be broken down into two categories:
- Low-volatility ETFs: Low-vol ETFs hold the lowest-volatility stocks within a selection universe. For instance, an S&P 500 low-vol ETF would try to hold the lowest-volatility stocks in the S&P 500, based on, say, beta or standard deviation (two common measures of volatility). There are numerous twists on this, of course: low-vol ETFs focus on stocks of varying sizes, or stocks that pay high dividends, or stocks in other countries.
- Minimum-volatility ETFs: Rather than holding the lowest-volatility stocks within their selection universe, minimum-vol ETFs try to create the lowest-volatility portfolio possible … even if doing so involves owning some volatile stocks. How would that work? If you own several stocks that are volatile, but whose performances aren't really correlated with one another, they could balance each other out to an extent, creating a portfolio that overall doesn't exhibit much volatility.
Both types of funds have historically been effective in limiting downside during periods of stock-market declines. Consider this from TD Asset Management, which studied low- and min-vol strategies:
"While low volatility is not the top-performing factor all the time, when we average across multiple periods, the low volatility style remains the best alternative for capital preservation and downside portfolio protection within equities, in times of market stress."
Sure, 2020 was an outlier, but don't let that deter you. As we mention in our look at the best ETFs for a bear market, bear markets aren't all built the same way. Also, the 2020 COVID bear market was extremely unusual—typically stable sectors exhibited much more volatility, while typically high-vol sectors (like technology) suddenly became defensive in the wake of a new environment of widespread remote work.
But understand that low- and min-vol strategies are a double-edged sword.
If these stocks don't move as much as the S&P 500 on the way down … well, they also tend not to move as much on the way up. As a result, some investors will have small permanent allocations to these ETFs to provide a little stability while not sacrificing much upside, while more aggressive investors will buy and sell these funds depending on market conditions.
Invest With CIBC
CIBC Investor's Edge lets you trade U.S. and Canadian stocks and ETFs, options, mutual funds, and bonds through registered accounts like FHSAs, TFSAs, RRSPs, and RESPs, as well as non-registered accounts.
Sign up with our link today and use promo code EDGE2026 to get 200 free trades with CIBC Investor's Edge.
3 Best Low- and Min-Vol ETFs to Buy
Now that you have that knowledge to work with, let's take a look at a few of the most noteworthy picks from our larger list of low- and minimum-volatility ETFs:
Invesco S&P 500 Low Volatility ETF
- Style: U.S. low-volatility large-cap stock
- Assets under management: $7.2 billion
- Dividend yield: 2.1%
- Expense ratio: 0.25%, or $2.50 per year on every $1,000 invested
We'll start with one of the largest volatility-specific funds of any sort: the Invesco S&P 500 Low Volatility ETF (SPLV), which is currently responsible for more than $7 billion in assets under management (AUM).
This straightforward index fund tracks the S&P 500 Low Volatility Index, which starts with the S&P 500's components, narrows it down to the hundred components with the lowest realized volatility over the past 12 months, then "weights" each stock based on its lack of volatility. (Weighting refers to the percentage of fund assets invested in something, be it an asset, industry, sector, country, etc.)
Right now, this construction method has built a portfolio that's high on utilities (25%), financials (21%), real estate (18%), and industrials (11%). The utility sector's dominance over the past couple months has brought names such as FirstEnergy (FE) and Duke Energy (DUK) into the top holdings. However, the fund is also loaded with blue chips from across the market, including Dividend Kings Coca-Cola (KO) and Johnson & Johnson (JNJ).
So, what about that low volatility? Let's look at beta, which is a common measure of volatility that compares an investment to a benchmark. For stocks, the benchmark is typically the S&P 500, and the benchmark is set at 1. A beta of less than 1 implies something is less volatile than the benchmark; a beta of more than 1 implies more volatility. SPLV has a beta of 0.40 right now, which implies that the ETF is less than half as volatile as the broader stock market.
That low volatility hasn't always worked out during downturns (see: the COVID bear market), but it usually has, especially during longer periods of market sluggishness.
For instance, during the 2022 bear market, Invesco S&P 500 Low Volatility only lost 15% compared to 24% for the S&P 500. It fared very well during 2025's near-bear market, declining by just about 6% between the Feb. 19 market high and April 8 market low, while the S&P 500 lost nearly 20%. And in 2026, SPLV outperformed the index, 4% to -4%, across a first quarter in which the S&P 500 was flat for the first two months before diving in March.
If you want straightforward protection tethered to the U.S. stock market, Invesco's fund is one of the best low-volatility ETFs you can buy.
Young and the Invested Tip: Low- and min-vol ETFs frequently own above-average dividend payers. But if you're looking for truly high-yielding funds, check out these ETFs instead.
Vanguard U.S. Minimum Volatility ETF
- Style: U.S. minimum-volatility large-cap stock
- Assets under management: $447.4 million
- Dividend yield: 1.8%
- Expense ratio: 0.13%, or $1.30 per year on every $1,000 invested
Remember: Low-volatility ETFs try to buy stable stocks. Minimum-volatility ETFs try to buy stocks that produce a stable portfolio. It's a subtle difference, but the Vanguard U.S. Minimum Volatility ETF (VFMV) aptly expresses it (emphasis mine):
"[The] Fund invests in stocks that together have the potential to generate lower volatility than the broad U.S. equity market."
Unlike many low- and min-vol strategies, VFMV isn't index-based, but actively managed. Manager Scott Rodemer tries to achieve minimum volatility by investing across stocks of all sizes, market sectors, and industry groups, while also trying to limit exposure to stocks with relatively low liquidity.
A great illustration of how low- and min-vol strategies take different paths is to look at how SPLV and VFMV differ from their benchmarks in how they hold stocks in the volatile technology sector.
- SPLV: ~2% tech (vs. ~39% for the S&P 500)
- VFMV: ~30% tech (vs. ~36% for the Russell 3000)
Sure, VFMV's tech exposure is 6 percentage points behind its benchmark. But technology is the greatest weight (by far!) in VFMV at the moment, and much more exposure than you get in the SPLV.
Rodemer believes he can achieve lower volatility through a more balanced portfolio. It's not perfectly balanced, as you'd guess from the technology allocation, but the asset spread is better than the Russell 3000. VFMV has three sectors with double-digit exposure, but also another four with high-single-digit exposure.
Currently, VFMV has a beta of 0.55—so Vanguard has built a portfolio that's a little more volatile than SPLV, but still considerably less wobbly than the broader market.
Vanguard U.S. Minimum Volatility came to life in 2018, so it doesn't have a long track record. But thus far it has delivered defense in downturns and better upside than SPLV in up markets.
Young and the Invested Tip: You can compare funds like these through the Morningstar Investor service, which we use in our own analysis. Check out our review here.
State Street SPDR US Small Cap Low Volatility Index ETF
- Style: Low-volatility U.S. small-cap stock
- Assets under management: $262.6 million
- Dividend yield: 2.2%
- Expense ratio: 0.12%, or $1.20 per year on every $1,000 invested
Small-cap stocks are known for their relatively high volatility.
Fundamentally, it's not difficult to figure out why. Small caps are inherently riskier as a group—compared to their larger-cap counterparts, they typically have fewer and less diverse revenue streams, less capital on hand, less (and pricier) access to capital, and less institutional investment, which can help stabilize stock returns over time. Conversely, it's much easier to deliver high rates of growth, and the same nominal dollar amount of share purchases in a small cap will have a bigger impact on its stock price.
In other words: Volatility represents a double-edged sword for small caps. So what happens if you reduce that volatility?
A look at the State Street SPDR US Small Cap Low Volatility Index ETF (SMLV) can give us an answer. The SMLV's tracking index starts with a universe of stocks whose market caps rank between 1,001 and 3,000, then includes (and ranks) low-volatility stocks based on a five-year measurement of standard deviation. No stock can account for more than 5% of the index, nor more than 20 times the stock's weighting within the index universe.
State Street Asset Management's fund currently holds just over 400 stocks. It allocates the greatest portions of its assets to the financial (32%), industrial (15%), and technology sectors (12%), while the defensive consumer staples and utility sectors account for less than 10% combined. While that might sound surprising, it's important to remember that:
- The small-cap universe SMLV draws from is different from the S&P 500. For instance, consumer staples and utilities are among the smallest sectors in this universe. Compared to that universe, however, they're actually better-represented in SMLV.
- A sector's defensive qualities might be different depending on company size and market periods. For instance, smaller regional banks have actually been less volatile than bigger financial firms over the trailing three and five years. But they've been more volatile longer-term.
The resulting portfolio produces a beta of 0.80. That's not only less volatile than the S&P 500, but it's considerably tamer than the small-cap Russell 2000 (which is a good comparison for SMLV), whose beta of 1.26 is much higher than the broader market.
What's most remarkable about SMLV is its performance. Yes, the Russell 2000 tends to provide more upside in roaring bull runs, while the Small Cap Low Volatility Index does better during flat and down periods, as you'd expect. However, SMLV is generally competitive over most long-term time frames, and it has even beaten the Russell 2000 on a total-return basis (price plus dividends) over the trailing five-year period.
In short: At least so far, SMLV hasn't just been one of the best low-volatility ETFs to buy … it has been one of the best ways to buy small-cap stocks, too.
—
The summer months are perilously close to an end, which can mean only one thing: We're oh-so close to football season—and for basically everywhere else outside of North America, fútbol season.
Thanks for reading along with us, and we'll see you again next week!
Riley & Kyle
Like what you're reading but not yet a subscriber? Get our weekly financial insights and updates delivered to your inbox every Saturday morning by signing up for The Weekend Tea today! You can also follow us on Flipboard for more great advice and insights.
Learn More About These and Other Funds With Morningstar Investor
If you're buying a fund you plan on holding for years (if not forever), you want to know you're making the right selection. And Morningstar Investor can help you do that.
Morningstar Investor provides a wealth of information and comparable data points about mutual funds and ETFs—fees, risk, portfolio composition, performance, distributions, and more. Morningstar experts also provide detailed explanations and analysis of many of the funds the site covers.
With Morningstar Investor, you'll enjoy a wealth of features, including Morningstar Portfolio X-Ray®, stock and fund watchlists, news and commentary, screeners, and more. And you can try it before you buy it. Right now, Morningstar Investor is offering a free seven-day trial and a discount on your first year's subscription when you use our exclusive link.
Read More
- 8 States That Tax Social Security Benefits
- Estimated Tax Due Dates [2026 Tax Year]
- 9 Best Debit Cards for Teens [Reviewed by a CPA + Father]