4min chapter

Quality and Low Volatility: The Factors That Get No Respect

Two Quants and a Financial Planner | Bridging the Worlds of Investing and Financial Planning

notes

CHAPTER

Low Volatility Investing Explained

This chapter explores the principles of low volatility in stocks, highlighting its measurement through standard deviation and beta. It contrasts theoretical expectations with actual market outcomes, illustrating how low volatility stocks can deliver comparable returns with reduced risk, while also addressing potential challenges during different market cycles.

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Transcript

Episode notes

In this episode of Two Quants and a Financial Planner, we dive deep into the world of quality and low volatility factors in investing. We explore how these factors work, their academic foundations, and their practical applications in portfolio construction. We discuss the definitions of quality and low volatility, examining how they're measured and why they can be valuable additions to investment strategies. We also look at the behavioral aspects that make these factors effective, particularly in helping investors stick to their long-term plans. Using real-world examples, we analyze several ETFs that employ quality and low volatility strategies, demonstrating how to use tools like Validea to understand what's really going on under the hood of these funds. We examine sector exposures, factor tilts, and how these ETFs might fit into broader portfolio strategies.

We hope you enjoy the discussion.

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