Tired of wild day-to-day swings in the S&P 500 with President Donald Trump in office? You might consider adding unique ETFs built to smooth out the volatility.
So-called low-volatility funds, like the $24.1 billion-in-assets iShares MSCI USA Min Vol Factor ETF, Invesco S&P 500 Low Volatility ETF and others, are turning into a way to dampen down the ups and downs in portfolios amid actions from the White House. They all come with costs that may well be worth it to help you sleep at night when the S&P 500 is swinging.
And it's working. The 10 largest low-volatility ETFs are up an average of 3.6% this year so far. That helps offset the roughly 4% drop by the S&P 500.
"The S&P 500 has declined 6.1% through the first 48 trading days of 2025," said Ladenburg Thalmann's Asset Management Philip Blancato. "This marks the worst start since 2020 during the pandemic."
How Low Volatility ETFs Can Help
These funds use a variety of strategies to lower the risk of wild swings in your portfolio. Some investors just welcome the relief.
"If the stock market selling off 10% after the strong run following the U.S. election in late 2024 has you concerned, a lower volatility or downside protection ETF might be best for you," said Todd Rosenbluth of TMX VettaFi. "With ETFs you can better manage your risk tolerance."
One of the most popular volatility dampeners doesn't use stocks. The $31.1 billion-in-assets JPMorgan Ultra-Short Income ETF lowers volatility by owning one of the safest corners of the bond market. The fund owns corporate and government debt that all matures in a year or less. And it's delivering exactly what shell-shocked investors are craving this year. The ETF yields 5% annually and the ETF's price is steady. So far this year, shares are up roughly 1%.
But iShares Invesco S&P 500 Low Volatility takes a more traditional safety-first approach using stocks. The ETF owns the 100 lowest-volatility stocks in the S&P 500. And the least volatile stocks get the highest weightings. "This typically results in relatively high exposure to defensive sectors like consumer staples and utilities and relatively low exposure to more volatile information technology and energy sectors," Rosenbluth said.
The ETF's top 10 holdings include Warren Buffett's Berkshire Hathaway, Coca-Cola and Marsh & McLennan.
Nearly 18% of the fund is in financial stocks and another 17% in utilities. Both of these sectors are generally lower volatility. Shares are up more than 4% this year.
Another Low-Volatility S&P 500 Approach
IShares MSCI USA Min Vol Factor uses stocks to lower risk, but differently than iShares Invesco S&P 500 Low Volatility does. The fund doesn't necessarily own S&P 500 stocks with the lowest volatility. It looks for stocks that counterbalance each others' turbulence.
It, too, counts Berkshire Hathaway as its largest position at 1.7% of the fund. But it also owns Progressive and Republic Services. It, too, has gained more than 4% this year. "USMV takes a more sector neutral approach than SPLV," Rosenbluth said.
And don't forget so-called buffer ETFs. Funds like the Innovator Defined Outcome ETFs let you trim your downside risk in exchange for limiting the upside if the S&P 500 rallies.
"Downside protection ETFs from Innovator and Calamos allow investors to determine how much or if any losses they are willing to incur in a period. They use options to make the implementation easier," Rosenbluth said.
Just know there's a price to be paid for lower volatility: Lower potential returns. "If the riskier stocks and sectors lead the market higher you will miss out on those gains. In addition, low risk stocks can and often do sell off. Any equity investment comes with risk," Rosenbluth said.
Top Low-Volatility ETFs
Based on assets under management
| ETF | Symbol | Assets ($ billions) | Yield |
|---|---|---|---|
| JPMorgan Ultra-Short Income | JPST | $31.1 | 5.0% |
| iShares MSCI USA Min Vol Factor | USMV | 24.1 | 1.6 |
| Invesco S&P 500 Low Volatility | SPLV | 7.5 | 1.7 |
| iShares MSCI EAFE Min Vol Factor | EFAV | 4.9 | 2.9 |
| iShares MSCI Emerging Markets Min Vol Factor | EEMV | 4.1 | 3.5 |
| Invesco S&P 500 High Dividend Low Volatility | SPHD | 3.4 | 3.3 |
| iShares MSCI Global Min Vol Factor | ACWV | 3.3 | 2.2 |
| Janus Henderson Short Duration Income | VNLA | 2.4 | 4.9 |
| Franklin International Low Volatility High Dividend Index | LVHI | 2.0 | 5.0 |
| Franklin U.S. Mid Cap Multifactor Index | FLQM | 1.4 | 1.2 |
