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Why Low-Volatility Funds Are Bleeding

TedTed
in Fund Discussions
FYI: Sometimes the simplest questions are the most important to ask. Such is the case when I looked at the flows into low-volatility funds last week as part of the regular checkup on ETF fund flows.

While the rest of the ETF market is pulling in money by the fistfuls, low-vol funds, as a group, are actually having a pretty awful year. Through the end of February, they were down $578 million in assets.
Regards,
Ted
http://www.etf.com/sections/blog/why-low-vol-funds-are-bleeding?nopaging=1

Comments

  • jerry
    Mostly posting because I want people to read this as it is IMHO a pretty good article
  • Old_JoeOld_Joe
    Thanks to both of you- I found that quite interesting.
  • VintageFreakVintageFreak
    Frankly I found it to be a bit mumbo jumbo. I did not come away with any conclusion as to whether I should buy low volatility funds NOW or not. If volatility is low today it can only go up and I think the author is saying this needs to happen for these funds to do well.

    Other than that he is making argument people chase performance and then bail when fund does not perform. Err, that's true of any fund class. And if these funds have done slightly worse than the index, I don't see how they have "not delivered on the promise". It is also implying to me most investors are dumb since they are selling these funds because it is not as if they are bailing because of bad performance, and then why exactly is not clear to me (or I guess I'm just not smart enough).

    I own VMVFX and is one of the few funds I call "holds". Instead of buying BMO low volatility funds I discovered through my ANALysis they were simply buying low volatility stocks so I bought Consumer Staples and Utility Funds as trades (sector funds will never we long term holds for me). Seems to me I should get out of these funds since I'm sitting on gains.

    Moral 1: There 3 kinds of lies. Lies, Damn Lies and Statistics.
    Moral 2: Statistics is like a bikini. What it reveals is interesting, but what it conceals is vital.
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