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Low volatility ETFs: What you need to know

IC readers are more enthusiastic than ever about low volatility ETFs but they aren't as simple as they look. Here's what you need to know to make an informed decision.

Low volatility exchange traded funds (ETFs) have grown popular with investors in recent years due to their low price tags and promise to cushion portfolios against the most dramatic market drops. But one size does not fit all when it comes to so-called 'smart-beta' ETFs, so which method should you opt for and what are the pitfalls?

What are low volatility ETFs and how do they work?

In response to our feature on shock-absorbing funds, several readers came forward in favour of low-volatility ETFs, which track subsets of major indices focused on less volatile components. "Approaching 80 and worrying about a volatile market, I am considering more ETFs, particularly those that provide a blend and minimum volatility," said one. While another reader in his 80s is considering iShares MSCI World Minimum Volatility ETF (MINV) in order to "go low risk/volatility".

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