Defying the Risk and Return Tradeoff | An In Depth Look at Low Volatility Investing

In investing, there is supposed to be a clear tradeoff between return and risk. Strategies that reduce risk are also supposed to come with a corresponding reduction in return But one factor defies that tradeoff. In this episode, we look at the low volatility factor. We discuss how it is measured, why it works and how it can be used in portfolios. We also examine some popular low volatility ETFs and look at the key criteria investors should look at when evaluating them.
02:31 - Defining low volatility
06:41 - Defying the risk and return tradeoff
09:05 - Measuring low volatility against the criteria of a good investing factor
11:11 - The risk and return data of low volatility
18:22 - Why does low volatility work?
22:44 - Breaking down the academic research on low volatility
29:58 - Using low volatility with other factors
36:03 - Evaluating some low volatility ETFS - USMV, SPLV
45;47 - Using low volatility in a multi-asset portfolio
49:33 - Low volatility and financial planning
#lowvolatilityinvesting
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[@gregorybainathsah7284]

There's a statistically significant positive correlation between Sammy Hagar references and my enjoyment of the episode

[@bruceaulabaugh]

Soul Provider by Michael Bolton is definitely on the low vol track to solid listening returns.

[@stefanof.8800]

Thank you guys for showcasing the Validea Factor Analysis page... pretty useful... shame it's US only (no UCITS ETF, which is the stuff I'm interested in).... but still pretty good stuff

[@HepCatJack]

There's a book by Pim van Vliet and Jan de Koning on this subject:"High Returns from Low Risk: A Remarkable Stock Market Paradox". Which claims higher performance from low volatility stocks. I think they're good for dollar cost averaging purchases but higher volatility stocks offer more entry point opportunities sometimes the equivalent of a year of S&P 500 investment can be returned in a couple of months. Sometimes, it goes the other way too and what looked like an attractive entry point was cheap on its way to much cheaper.

[@MichaeldeSousaCruz]

25% in 6 months. All gain, no pain. I’m taking more. I won’t stop until I take it all. #MMT

[@mmm-cake]

✨

[@HepCatJack]

A typical example of a low volatility stock are utilities. PG&E is a utility but it still suffered volatility when the California fire happened. Enron was considered a utility company, it had a core business of pipelines then there was the accounting fraud. AT&T was the big tech company and a telephone utility company and it originally had recurring revenue from the telegraph then it was broken into mini bell companies. So even with companies considered low-volatility things can still go very wrong. Perhaps if AT&T hadn't been broken up, with its ownership of Unix it might have been a big player in the 1980 - 1990's during the computer revolution It might have ended up where Microsoft is.

[@roberthodge6711]

This seems like a lot of data mining with no business fundamentals, guys. Just go to the casinos and play the slots.