Barbara FriedbergInvesting Expert Writer
Friedberg is a former investment portfolio manager, university finance instructor and author of three books including "Personal Finance; An Encyclopedia of Modern Money Management." Her work has been featured in national investment publications such as Forbes Advisor, Investopedia, U.S.News and World Report, Yahoo Finance, GoBankingRates and InvestorPlace. She is a regular panelist on the Money Tree Investing Podcast and owns BarbaraFriedbergPersonalFinance.com.
Barbara Friedberg
Barbara FriedbergInvesting Expert Writer
Friedberg is a former investment portfolio manager, university finance instructor and author of three books including "Personal Finance; An Encyclopedia of Modern Money Management." Her work has been featured in national investment publications such as Forbes Advisor, Investopedia, U.S.News and World Report, Yahoo Finance, GoBankingRates and InvestorPlace. She is a regular panelist on the Money Tree Investing Podcast and owns BarbaraFriedbergPersonalFinance.com.
Investing Expert Writer
Michael AdamsLead Editor, Investing
Michael Adams is lead editor, investing at Forbes Advisor. He's researched, written about and practiced investing for nearly two decades. As a writer, Michael has covered everything from stocks to cryptocurrency and ETFs for many of the world's major financial publications, including Kiplinger, U.S. News and World Report, The Motley Fool and more. Michael holds a master’s degree in philosophy from The New School for Social Research and an additional master's degree in Asian classics from St. John’s College.
Reviewed
Michael Adams
Michael AdamsLead Editor, Investing
Michael Adams is lead editor, investing at Forbes Advisor. He's researched, written about and practiced investing for nearly two decades. As a writer, Michael has covered everything from stocks to cryptocurrency and ETFs for many of the world's major financial publications, including Kiplinger, U.S. News and World Report, The Motley Fool and more. Michael holds a master’s degree in philosophy from The New School for Social Research and an additional master's degree in Asian classics from St. John’s College.
Lead Editor, Investing
Reviewed
Updated: Apr 3, 2024, 11:38am
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
Stock prices rise and fall constantly, sometimes by a lot. That’s the nature of the stock market, and it’s also a good definition of volatility. Professional investors use volatility ETFs to profit from the endless churn of stock prices or to insulate their portfolio from heightened volatility.
The Chicago Board of Options Exchange Volatility Index, commonly known as the VIX index, tracks the magnitude of price changes that traders expect to see in the S&P 500 market index over the coming months. This makes the VIX a reliable indicator of future stock market volatility. Most volatility ETFs trade VIX futures contracts as the core goal of their investment portfolios.
Whether you want to profit from volatility or minimize it—or both—Forbes Advisor’s list of the best volatility ETFs has options for you. We have taken a closer look at two types of funds: ETFs that track the performance of the VIX index and also ETFs that invest in low-volatility stocks to help investors hedge against market declines.
Why You Can Trust Forbes Advisor Small Business
Read more
Best Ofs
- Best Portfolio Management Apps
- Best Online Brokerage Accounts
- Best Investment Apps
- Best Robo Advisors
- Best Crypto Exchanges
- Best Crypto Wallets
- Choosing A Financial Advisor
Show Summary
- The Best Volatility ETFs of April 2024
- Simplify Volatility Premium ETF (SVOL)
- Short VIX Short-Term Futures ETF (SVXY)
- iShares MSCI EAFE Min Vol Factor ETF (EFAV)
- SPDR SSGA US Small Cap Low Volatility Index ETF (SMLV)
- Fidelity Low Volatility Factor ETF (FDLO)
- Methodology
- What Are Volatility ETFs?
- Next Up In Investing
The Best Volatility ETFs of April 2024
Simplify Volatility Premium ETF (SVOL)
Expense Ratio
1.16%
Total Assets
$825.6 million
1-Year Avg. Ann. Return
21.76%
1.16%
$825.6 million
21.76%
Editor's Take
The Simplify Volatility Premium ETF is a rare beast. This actively managed fund aims to deliver approximately one-fifth to three-tenths (-0.2x to -0.3x) of the inverse performance of the VIX—a popular index that measures the market’s expectations for volatility. Knowing how much volatility is heading our way can help investors minimize the impact of volatility on their portfolios.
SVOL accomplishes this goal by actively trading shares of other ETFs, Treasury securities and options in an effort to short market volatility. The fund owns longer-term U.S. Treasuries and shares of the ProShares Ultra VIX Short Term Futures ETF, and also trades options in order to protect the value of the portfolio.
Short VIX Short-Term Futures ETF (SVXY)
Expense Ratio
0.950%
Total Assets
$308.5 million
1-Year Avg. Ann. Return
73.71%
0.950%
$308.5 million
73.71%
Editor's Take
The Short VIX Short-Term Futures ETF targets half of the inverse (-0.5X) of the daily returns of the S&P 500 VIX Short-Term Futures Index. The fund trades one-month CBOE VIX futures contracts, and also allocates part of its portfolio to cash.
SVXY is best for experienced investors who are looking to profit from declines in the expected volatility of the S&P 500 over the upcoming month. Daily returns tend to compound, which means performance over the long term can greatly differ from the performance of the benchmark index index.
iPath S&P 500 VIX Mid-Term Futures ETN (VXZ)
Expense Ratio
0.89%
Total Assets
$37.8 million
1-Year Avg. Ann. Return
-39.23%
0.89%
$37.8 million
-39.23%
Editor's Take
The iPath S&P 500 VIX Mid-Term Futures ETN is an exchange-traded note that gives investors exposure to the S&P 500 VIX Mid-Term Futures Total Return Index. When there are periods of elevated price volatility in medium-term S&P 500 futures, the value of VXZ shares tend to rise, while they decline in value when medium-term market volatility is moving lower.
VXZ fund maintains a long position in intermediate VIX futures contracts, giving holders exposure to medium-term expectations for the volatility index. The fund rolls over VIX futures contracts with expirations of four, five, six and seven months.
Exchange-traded notes are debt instruments with shares that trade on the stock market like ETFs. VXZ is designed to help sophisticated investors take tactical, short-term positions on expected market volatility in the medium term. It offers no yield and the long-term value of the fund goes to zero, making it totally inappropriate to buy and hold.
iPath S&P 500 VIX Short-Term Futures ETN (VXX)
Expense Ratio
0.89%
Total Assets
$330.2 million
1-Year Avg. Ann. Return:
-70.05%
0.89%
$330.2 million
-70.05%
Editor's Take
The iPath S&P 500 VIX Short-Term Futures ETN is an exchange-traded note that provides exposure to the S&P 500 VIX Short-Term Futures Total Return Index. When there are periods of elevated price volatility in shorter-term S&P 500 futures, the value of VXX shares tend to rise, while they decline in value when short-term market volatility is moving lower.
VXX offers exposure to a long position in the first and second month VIX futures contracts. These derivatives indicate professional investors expectations for shorter-term moves in the VIX.
Exchange-traded notes are debt instruments with shares that trade on the stock market like ETFs. VXZ is designed to help sophisticated investors take tactical, short-term positions on expected market volatility in the medium term. It offers no yield and the long-term value of the fund goes to zero, making it totally inappropriate to buy and hold.
SPDR SSGA US Small Cap Low Volatility Index ETF (SMLV)
Expense Ratio
0.12%
Total Assets
$181.3 million
1-Year Avg. Ann. Return
5.91%
0.12%
$181.3 million
5.91%
Editor's Take
If you’re a fan of nimble, fast-growing small companies but would prefer less volatility with your small-cap stocks, the SPDR SSGA US Small Cap Low Volatility Index ETF might be for you. This passive index fund tracks the SSGA US Small Cap Low Volatility Index.
SMLV’s portfolio includes more than 420 of the lowest volatility stocks from the small-cap universe. These firms also tend to have lower valuations, as represented by a price-to-earnings ratio (P/E ratio) around 13. Financial stocks dominate the fund, accounting for approximately 30% of the portfolio, roughly double the weighting of the next biggest sector, industrials, followed by technology, healthcare and real estate stocks.
Fidelity Low Volatility Factor ETF (FDLO)
Expense Ratio
0.29%
Total Net Assets
$1.0 billion
1-Year Avg. Ann. Return
18.75%
0.29%
$1.0 billion
18.75%
Editor's Take
The Fidelity Low Volatility Factor ETF is a factor fund that screens the universe of large- and mid-cap stocks for holdings that demonstrate low-volatility earnings and price performance. It’s a good choice for investors who want to insulate their portfolio from continuing market volatility, including periodic price declines.
Holding approximately 130 stocks, FDLO’s portfolio is very concentrated. The vast majority of holdings are U.S. stocks. A very small percentage of FDLO’s holdings are sold short. There is also a tiny allocation to Switzerland and the UK. As you might expect with a low-volatility fund, FDLO outperformed the S&P 500 during the 2022 bear market. When stocks rebounded, returns were relatively close to the S&P 500.
*All data sourced from Morningstar Direct, current as of April 3, 2024, unless noted otherwise.
Methodology
Our listing of the best volatility ETFs is divided into two categories. The first are VIX-based, short-term trading ETFs that are designed for sophisticated traders. The second are low-volatility stock ETFs, suitable for investors who want to hedge against volatile market drawdowns.
There is a small group of 12 or so VIX-based ETFs available on the market today. We ranked these funds by strategy and assets under management. Our picks had above average AUMs, expense ratios below 1% and at least one year of history.
The initial group of low-volatility stock ETFs included 25 funds. We sorted this group by strategy and expense ratio, and chose funds that were likely to perform well under the current market conditions.
What Are Volatility ETFs?
Volatility ETFs are exchange-traded funds that aim to give investors exposure to the Chicago Board of Options Exchange Volatility Index—the VIX—or insulate their portfolios from excessive market volatility.
The former category of volatility ETFs invest in a combination of futures contracts, Treasury securities or other derivative contracts that speculate on the future price movements of the S&P 500 index. These funds are best for sophisticated traders who understand the complexities of the VIX and are not appropriate for buy-and-hold strategies.
The low-volatility stock ETFs, on the other hand, are much more straightforward, and they may be held over the long term. These funds help investors manage the impact of volatile price declines on their portfolios. They are similar to smart beta ETFs and appropriate for a wider swath of the investing public.
Next Up In Investing
- Buy The Dip: Best Cheap Stocks To Buy Now
- The Best Growth ETFs
- Why Is Inflation So High?
- What Are I Bonds?
- Acorns Review
- Robinhood Review
Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circ*mstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. Performance information may have changed since the time of publication. Past performance is not indicative of future results.
Forbes Advisor adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners.
