What does "low volatility" actually mean?

Low volatility refers to stocks that tend to experience smaller price fluctuations compared to the overall market. These companies typically have more stable earnings, established business models, and less dramatic reactions to market news. Think of them as the steady sailors in stormy seas – they may not surge ahead dramatically in bull markets, but they also don't sink as deeply during downturns.

Are low volatility stocks good for beginners?

Yes, low volatility stocks can be excellent choices for beginning investors. Their relative stability makes them less intimidating, as you won't see your investment value swing wildly from day to day. They provide a gentler introduction to stock market investing and can help build confidence while you learn more about investing. They're particularly suitable if you're risk-averse or investing for longer-term goals.

Why might low volatility stocks outperform over time?

This seems counterintuitive to many people (higher risk should mean higher returns, right?), but research has shown low volatility stocks often outperform over the long term. This happens because they tend to lose less during market downturns, requiring less growth to recover. Additionally, these companies often have consistent cash flows that allow for dividend payments and steady growth. It's like the tortoise beating the hare – slow and steady progress often wins the race.

What industries typically have low volatility stocks?

Low volatility stocks are commonly found in industries that provide essential products and services that remain in demand regardless of economic conditions. These include healthcare (like Johnson & Johnson), consumer staples (like Procter & Gamble and Coca-Cola), utilities, telecommunications, and certain energy companies (like Exxon Mobil). These sectors tend to be less affected by economic cycles because people need their products regardless of the economic environment.

7 handpicked stocks

Low Volatility Stocks

Are you feeling seasick? Sail through calmer waters with these lower volatility investments. These handpicked stocks were carefully selected by our analysts for their history of stability and potential for consistent returns over time.

Han Tan | Market Analyst

Updated 1 day ago | Published at May 21