By Jason Zweig
Boring is back.
In recent days, software stocks and other risky assets have been mowed down by artificial intelligence, but stodgier stocks are springing up to replace them among the market's leaders.
Many investors are hoping to sidestep the Grim Reaper of AI, reduce their exposure to the biggest technology stocks and still earn decent returns by beefing up their positions in these boring companies.
But make sure you understand the trade-offs before you join in. Over the short run, you'll probably sleep better investing in boring companies, but the long run could end up lasting longer than you realize.
The recent selloff has hit some of last year's most exciting stocks the hardest. In 2025, Robinhood Markets was up 204%; Palantir Technologies, 135%; and AppLovin, 108%. So far in 2026, they're down 36%, 27% and 44%, respectively.
Meanwhile, the State Street Consumer Staples Select Sector SPDR, an exchange-traded fund stocked with boring standbys such as Walmart, Costco Wholesale, Procter & Gamble and Coca-Cola, has gained 12% -- almost as much as it returned in the previous four years combined. This week, Walmart's market capitalization surpassed $1 trillion for the first time.
And Invesco S&P 500 Low Volatility, an ETF that specializes in stocks whose prices fluctuate less sharply than the overall market, is up nearly 5%. A similar fund, iShares MSCI USA Min Vol Factor, is up almost 1%. Both are ahead of the S&P 500, which is down nearly 1% for the year so far.
These "low-vol" funds don't have a third of their assets in a handful of huge tech companies, the way S&P 500 index funds do. Instead, they favor such formerly boring fare as utility, financial and consumer-staples stocks. Among their holdings are Waste Management, Chubb, Realty Income, Colgate-Palmolive and industrial-gas provider Linde.
"In many ways these stocks fly under the radar, and that can be a positive for long-term investors," says Jay Jacobs, U.S. head of equity ETFs at BlackRock.
Boring stocks tend to do better when the overall market does worse. In 2022, when the S&P 500 incurred an ugly 18.1% loss, the iShares and Invesco low-volatility funds slipped 9.4% and 4.8%, respectively.
Over time, these funds have tended to capture roughly two-thirds to three-quarters of the S&P 500's losses during down markets -- and of its gains during up markets. That makes them appealing if you expect giant tech stocks -- or the market as a whole -- to falter.
After all, it takes a 100% gain to recover fully from a 50% loss, a 33% gain to recover from a 25% loss, and so on. "Low volatility has less of a hole to dig itself out of to get back to that prior peak," says Nick Kalivas, Invesco's head of factor and core equity ETF strategy. "That ability to weather selloffs can be very useful."
Low-volatility funds appear to be popular among retirees and near-retirees. "If you recognize the need for your portfolio to grow over the long term and keep up with inflation, you can't just be in fixed income," says BlackRock's Jacobs. These funds, by maintaining exposure to stocks at less risk, can help older investors stay the course.
ETFs specializing in boring stocks can serve another function. Let's say you would like to have roughly 60% of your money in stocks and 40% in fixed income -- but you're worried about keeping so much in bonds, given rising budget deficits and political pressure on the Federal Reserve.
Because low-volatility ETFs, on average, blunt the losses and gains of the stock market, "that allows you to re-risk elsewhere," says Brian Jacobs, a portfolio manager at Aptus Capital Advisors, an investment firm in Fairhope, Ala., that manages about $14 billion in assets. With 80% in a low-volatility ETF and 20% in bonds, he says, you could achieve a result similar to a 60/40 stock/bond portfolio with about the same risk.
The advantages of investing in boring stocks were explored decades ago by Robert Haugen, a finance professor at the University of California, Irvine, who died in 2013.
Haugen's book "The New Finance" was rigorous and often laugh-out-loud funny, but is unfortunately out of print.
In opposition to the efficient-market hypothesis, which holds that stock prices reflect all available information, Haugen argued that "the pathetically inefficient market doesn't seem to have a clue as to what is going on."
Based on his analysis of data from 1928 to 1992, "the risk-return trade-off is truly negative," Haugen argued. In the long run, he wrote, exciting technology or healthcare stocks end up earning lower returns than companies "making bottle caps or toilet paper."
Why? Less-volatile stocks, Haugen wrote, are priced too cheaply "because they are boring." That's why buyers can earn higher returns in the long run.
Asset managers and index providers often cite Haugen's overall research findings. They seldom mention one of his warnings: Haugen found several long periods -- one lasting the better part of three decades -- in which boring stocks failed to outperform.
If you hold a low-volatility fund (or your own basket of boring stocks), you're likely to outperform the S&P 500 in the short run whenever the market stumbles.
In the long run, you'll probably fall behind whenever most investors want exciting stocks instead -- and you would better be prepared for those periods to last for years. In the very, very long run, however, boring stocks might well come out ahead.
And so will you, if you can stick with them when they're a lot more boring than they happen to be right now.
Write to Jason Zweig at intelligentinvestor@wsj.com
(END) Dow Jones Newswires
February 06, 2026 09:00 ET (14:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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