NEW YORK (AP) – Freaked out by the stock market’s big swings?
Then the investment industry has something it built just for you: funds that hope to offer a steadier ride. That sounds especially comforting after this year’s jarring start for markets, in which drops of more than 1 percent have become typical. But be careful, the funds carry their own risks.
These mutual funds and exchange-traded funds own stocks that could charitably be described as boring. Think utilities, telecoms and other companies whose profits – and thus stock prices – don’t fluctuate so much. The funds avoid jack-rabbit stocks that tend to have either really good or really bad days.
These funds advertise themselves by including terms like “low volatility” or something similar in their names, and fund companies have rolled out dozens of them in the last five years to meet strong demand. Older investors approaching retirement or already retired are particularly drawn to them. The ALPS Sector Low Volatility ETF, which trades under the symbol “SLOW,” began trading in July, for example.
The problem, for now at least, is that the types of stocks these funds own have uncertain outlooks. Many are at risk of falling if interest rates rise, and the expectation is for the Federal Reserve to continue raising its benchmark rate. And many have already been bid up to heights that look pretty thrilling for supposedly boring companies.