Low Volatility ETFs

A low volatility ETF screens its potential holdings based on the volatility of the market price or the volatility of the returns of the stock. Low volatility ETFs select more securities that have lower volatility than average. Although low volatility ETFs can outperform the market, low volatility ETFs are not necessarily designed to outperform the market. Rather, they attempt to appeal to investors who prefer less volatility. Certain investors are willing to give up a little return for a more consistent, stable return.

There are a large number of low volatility ETPs, as shown in this table:

Category	Count
Global Equity	36
Special Security Types	3
US Equity	67
US Fixed Income	1
Total	107

The number of low volatility ETFs continues to grow, as shown by this table:

Year of Inception	Count
2003	1
2006	2
2011	5
2012	6
2013	9
2014	5
2015	14
2016	22
2017	17
2018	8
2019	8
2020	8
2021	2
Total	107

Note that there were actually even more ETFs launched then this table shows, as we are only displaying the launch dates of ETFs still active in our database. There were more ETFs that were launched during these years that have since been closed down by their sponsor.

More and more ETFs are being launched that combine low volatility investing with other investment factors:

Number of Factors Used	Count
1	29
2	17
3	20
4	31
5	8
6	1
7	1
Total	107

Here are the low volatility ETFs that only use volatility as a factor in selecting securities (i.e. they are not multi-factor ETFs), if you want to read some examples of the approaches taken by low volatility ETFs:

Symbol	Description	Inception Date	Category	Actions
SPLV	S&P 500 Low Volatility Portfolio ETF	05/05/2011	US Equity	Analyze
ACWV	iShares Edge MSCI Minimum Volatility Global ETF	10/18/2011	Global Equity	Analyze
EEMV	iShares MSCI Emerging Markets Minimum Volatility ETF	10/18/2011	Global Equity	Analyze
EFAV	iShares MSCI EAFE Minimum Volatility Index Fund ETF	10/18/2011	Global Equity	Analyze
USMV	iShares MSCI U.S. Minimum Volatility ETF	10/18/2011	US Equity	Analyze
EELV	Invesco S&P Emerging Markets Low Volatility Portfolio ETF	01/13/2012	Global Equity	Analyze
IDLV	S&P International Developed Low Volatility ETF	01/13/2012	Global Equity	Analyze
XMLV	Invesco S&P 400 Low Volatility ETF	02/12/2013	US Equity	Analyze
XSLV	Invesco S&P 600 Low Volatility ETF	02/12/2013	US Equity	Analyze
LGLV	SPDR SSGA US Large Cap Low Volatility Index ETF	02/20/2013	US Equity	Analyze
SMLV	SPDR SSGA US Small Cap Low Volatility Index ETF	02/20/2013	US Equity	Analyze
SIZE	iShares MSCI USA Size Factor ETF	04/16/2013	US Equity	Analyze
IDLB	Invesco FTSE International Low Beta Equal Weight Portfolio ETF	11/05/2015	Global Equity	Analyze
USLB	Invesco Russell 1000 Low Beta Equal Weight Portfolio ETF	11/05/2015	US Equity	Analyze
HDMV	First Trust Horizon Managed Volatility Developed International ETF	08/24/2016	Global Equity	Analyze
HUSV	First Trust Horizon Managed Volatility Domestic ETF	08/24/2016	US Equity	Analyze
SMMV	iShares Edge MSCI Min Vol USA Small-Cap ETF	09/07/2016	US Equity	Analyze
FDLO	Fidelity Low Volatility Factor ETF	09/12/2016	US Equity	Analyze
FLLV	Franklin Liberty U.S. Low Volatility ETF	09/20/2016	US Equity	Analyze
RNEM	Emerging Market Equity Select ETF	06/20/2017	Global Equity	Analyze
RNDM	Developed International Equity Select ETF	06/20/2017	Global Equity	Analyze
SPMV	Invesco S&P 500 Minimum Variance Portfolio ETF	07/13/2017	US Equity	Analyze
RBIN	Nationwide Risk-Based International Equity ETF	09/15/2017	Global Equity	Analyze
RBUS	Nationwide Risk-Based U.S. Equity ETF	09/15/2017	US Equity	Analyze
JMIN	JPMorgan U.S. Minimum Volatility ETF	11/09/2017	US Equity	Analyze
VFMV	Vanguard U.S. Minimum Volatility ETF	02/14/2018	US Equity	Analyze
HSMV	First Trust Horizon Managed Volatility Small/Mid ETF	04/07/2020	US Equity	Analyze
SIXL	6 Meridian Low Beta Equity Strategy ETF	05/11/2020	US Equity	Analyze
GBLO	Global Beta Low Beta ETF	07/24/2020	US Equity	Analyze

Do low volatility ETFs outpeform?

There is some evidence that low volatility ETFs can outperform the market. S&P has two indexes that slice the S&P 500 into high beta stocks and low volatility stocks. SP500HBETA selects the 100 stocks in the S&P 500 Index with the highest beta. SP500LVOL selects the 100 stocks in the S&P 500 Index with the lowest volatility. This data suggests that those stocks with the highest beta underperform the market (SPY).

But if you look at the largest of the low volatility ETFs, the performance compared to SPY is not that great. Let's look at a couple of examples.

SPLV is one of the biggest of the low volatility ETFs. It invests in 100 of the stocks from the S&P 500 that have the lowest volatility during the past 12 months:

USMV is another one of the biggest low volatility ETFs. USMV uses a volatility model to select about 180 stocks from the MSCI USA Index, which is a capitalization-weighted index of the largest U.S. stocks (about 625 stocks).

Keep in mind that investors that use the Sharpe Ratio to build and analyze portfolios will tend to favor low volatility ETFs. The Sharpe Ratio rewards low volatility ETFs, because a low volatility ETF that generates the same return as its benchmark will have a higher Sharpe Ratio. Here are the lifetime Sharpe Ratios for USMV and SPLV (i.e. Sharpe Ratios calculated using the lifetime of the ETFs), compared to the Sharpe Ratio of SPY during the same matching periods:

Symbol	Description	Sharpe Ratio	SPY Sharpe Ratio
SPLV	S&P 500 Low Volatility Portfolio ETF	0.0619	0.8127
USMV	iShares MSCI U.S. Minimum Volatility ETF	0.0804	0.9525

Since these ETFs have higher Sharpe Ratios, it means they have outperformed SPY on a risk adjusted basis.

Editor's Choice ETFs

The low volatility factor is much more commonly used by a multi-factor ETF rather than as a stand alone factor. One thing we do at StockMarketMBA.com is give each ETF a rating for long term investors. Here are the multi-factor ETFs that use low volatility as one investment factor that we have rated as an "editors choice", our highest rating:

Symbol	Description	Inception Date	Category	Actions
IDLV	S&P International Developed Low Volatility ETF	01/13/2012	Global Equity	Analyze
XMLV	Invesco S&P 400 Low Volatility ETF	02/12/2013	US Equity	Analyze
FLQE	Franklin LibertyQ Emerging Markets ETF	06/01/2016	Global Equity	Analyze
XSHD	Invesco S&P SmallCap High Dividend Low Volatility ETF	11/29/2016	US Equity	Analyze

You can see a list of all ETFs that are using volatility as an investment factor using our ETF screener.

All data is a live query from our database. The wording was last updated: 04/09/2020.