By Paul R. La Monica
This hasn't been a great year to be invested in stocks if you're a worrywart.
The war in Iran and the subsequent spike in oil prices have Wall Street on edge. In addition, the market is nervous about private credit problems in the software sector and their impact on big banks and other financial stocks. Investors are also grappling with questions about what impact artificial intelligence will have on the labor market and what's next from the Federal Reserve. Fortunately, there are pockets of the stock market that are holding up just fine despite all these concerns.
Low volatility and minimum volatility funds, which own stocks that tend to have smaller price fluctuations (both up and down) than the overall market, have been standout performers this year. The Invesco S&P 500 Low Volatility exchange-traded fund, for example, is up about 3% this year while the S&P 500 is down slightly.
One reason that the Invesco ETF is holding up so well? It is primarily invested in sectors that are known for having companies that pay high dividends. About 60% of the fund's assets are in utilities, financials, and real estate investment trusts.
Utilities alone make up nearly 25% of the portfolio, with high-yielding stocks such as Southern Co., CMS Energy, and Entergy among the fund's holdings. The fund takes an equal-weighted approach so no one investment makes up more than 1.4% of the portfolio.
Other low- and minimum-volatility funds have thrived this year too, particularly those that invest in dividend stocks. The Invesco S&P 500 High Dividend Low Volatility ETF, which counts Verizon, Altria, and Pfizer among its top positions, is up nearly 5% this year.
And several low-volatility international funds have fared even better than their U.S. counterparts. The iShares MSCI Emerging Markets Min Vol Factor ETF, iShares MSCI EAFE Min Vol Factor ETF, and Franklin International Low Volatility High Dividend Index ETF are up about 6%, 8% and 12% this year, respectively.
Still, investors need to realize that while low vol funds may protect them from downdrafts in the broader market, they also won't do as well during big bull runs. Nearly all of these funds are trailing the S&P 500 over the past 12 months as well as over the last three and five years.
The Franklin fund, with top holdings in several global energy, natural resources, pharmaceutical and consumer companies such as Shell, Suncor, Novartis and Nestlé, is the notable exception. It's up nearly 17% on an annualized basis for the past five years, compared to about a 12% gain for the S&P 500.
Write to Paul R. La Monica at paul.lamonica@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 13, 2026 13:19 ET (17:19 GMT)
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