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Volatility to fear, low vol gains, better ways to manage toppy markets and income at a discount

If you're nervous about stock market levels and anticipating a return of volatility you may have considered buying an exchange traded note (ETN) tracking a volatility index such as the VIX. But these indices are not a real measure of volatility while the ETNs which aim to track them may not replicate them well, reports deputy personal finance editor Kate Beioley. She explains why this is the case, how these funds and indices work, and why you might be better looking at alternative options.

OTHER STORIES IN THIS ISSUE

Another option for those fearful of market wobbles is low volatility exchange traded funds (ETFs), which have delivered a decade of strong growth and generated higher returns than their comparable broad market indices. But the party may now be over for low volatility ETFs, explains Kate Beioley, though there are some reasons why you still might want to hold these funds.

So if volatility is a concern you might be better off checking out this week's Money section, where personal finance writer Emma Agyemang explains why volatility is not necessarily a bad thing and ways you can take advantage of it. But for investors who really do have to avoid it she also explains how to create an asset allocation to dampen volatility and highlights some ways to manage portfolios through toppy markets.

IC Top 100 Fund JPM Global Macro Opportunities (GB00B4WKYF80) also looks to mitigate downside and reduce volatility, though didn't do so well last year. Its managers explain why this was the case and how a more optimistic portfolio allocation is helping performance to bounce back.

This week's tip highlights an investment trust which pays attractive dividends but is trading at one of its widest discounts in recent years after underperforming last year. However, it is run by a manager with a strong long-term performance record and is already showing signs of improvement, so now could be a relatively cheap moment to get in.

European smaller companies funds are having a very good 2017 and not just because of the Euro/Sterling exchange rate. We look at what has been driving this sector and if it can continue to do well, as well as the funds and sectors that have been topping the tables.

This week's Portfolio Clinic features a reader who hopes he can afford to retire early. Our experts point out that he shouldn't underestimate how much he will spend in retirement and suggest some ways to improve the diversity of his portfolio.

In our latest podcast Kate Beioley highlights some areas in which you can find cheap equity income, and explains how the financial regulator is proposing to make fund costs clearer. Also on this week's show is Henrietta Grimston, relationship manager at Seven Investment Management, who sets out some ways to maximise the tax efficiency of your investments.

Our podcast is now available across five different distribution channels to allow you to access it in the most convenient way. Find us on Soundcloud, Acast, Audioboom, Stitcher and iTunes.

Do you have a personal finance problem? Or want to know more about something in this week's personal finance pages? If so let us know by getting in touch with leonora.walters@ft.com, kate.beioley@ft.com or emma.agyemang@ft.com.

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