Low-Volatility Stocks to Steady Your Portfolio Performance

Low-volatility stocks are those that tend to move less than the broader markets. They can provide steady growth and help you sleep at night.

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With some choppy trading of late, especially in growth stocks, investors are becoming increasingly sensitive to volatility in high-priced equities. If you’ve been actively managing your portfolio than in all likelihood, you’ve sold out of your worst-performing stocks, and haven’t bailed on your biggest winning stocks. Perhaps you’re even looking to do some new buying, now that the market seems to be stabilizing. But you don’t feel like taking any unnecessary risks. Reliable, low-volatility stocks are the best place to turn.

One measure of a stock’s level of volatility is its beta, which measures stock price movement relative to the broader market. If a stock is just as volatile as the overall stock market, its beta is 1. If it’s more volatile than the market, it’s higher than 1 – anything above a 2 right now is a red flag, given that the market is already volatile enough. But if a stock’s beta is less than 1, that means it’s been less subject to the wild mood swings that have infected the market over the past weeks.

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Those types of low-volatility stocks are worth owning. You don’t have to check on them every hour, worrying that they might suddenly fall off a cliff in response to the latest horrific news headline. They won’t keep you up at night. You can buy them (I’d start with small positions), stash them away in your portfolio, and trust that they’ll hold steady through the end of this global pandemic—and perhaps morph into steady (if unspectacular) gainers when the clouds finally part.

Here are five low-volatility stocks you can trust right now, in descending order of market cap:

5 Low-Volatility Stocks to Ride Out the Storm

Microsoft (MSFT)

Beta: .80

Year-to-Date Performance: +14%

Johnson & Johnson (JNJ)

Beta: 0.73

YTD Performance: +4.4%

Walmart (WMT)

Beta: 0.47

YTD Performance: -4.5%

Costco Wholesale Corp. (COST)

Beta: 0.65

YTD Performance: -4.6%

Gilead Sciences (GILD)

Beta: 0.39

YTD Performance: +9.9%

None of those should shock you. Johnson & Johnson has always been one of those reliable, low-volatility stocks, and is a Dividend Aristocrat to boot, having raised its dividend payouts for 57 years straight. It has a 2.5% yield, which is a nice cushion should it give back any of this year’s gains. And as a developer of medical devices, pharmaceutical equipment and essential consumer staples like baby shampoo, Band-Aids and Tylenol, Johnson & Johnson is in the right industry for a global pandemic.

Costco and Walmart are also good low-volatility stocks. Both are among the rare brick-and-mortar stores that provide essential goods and compete with Amazon and other e-commerce retailers on price, and people have flooded the stores of both companies to stock up on food, paper towels, toilet paper and other supplies to help sustain them through prolonged social distancing. Both companies pay dividends too, though Walmart’s is higher yielding (1.6% vs. 0.8%).

Microsoft is benefitting from essentially the entire world working, watching and playing at home. Whether it’s their personal computers, Surface Pro laptops or Xbox video game consoles used in the home, or its fast-growing Azure cloud-computing platform used by businesses for analytics, storage and virtual computing, Microsoft’s products have plenty of demand right now. As a result, MSFT stock is up 14% so far this year.

And then there’s Gilead Sciences, the one true healthcare stock of the bunch. The company has a drug called Veklury (remdesivir) that was previously used to treat Ebola patients, and is now being tested on COVID-19 patients; it’s been used with mixed results throughout the pandemic and is in Phase 3 studies. Should it demonstrate efficacy, especially against more-potent variants, the stock’s run is far from over.

Bottom Line on Low-Volatility Stocks

Uncovering stocks that can make you rich is typically the goal of any investor. But in times like these, when uncertainty is extremely elevated due to a rare global catastrophe (truth be told, only a handful of people alive have seen something like this), your main investing goal should be not to lose money. These five low-volatility stocks should help mitigate big losses.

They might not make you rich in the long run. But they’re good, reliable stocks to have in your portfolio—in good times and bad.

*This post has been updated from a previously published version.

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Stock investing is not an exact science, and common mistakes can cost you a lot of money. Avoid these pitfalls—revealed in this FREE report, Five Mistakes to Avoid When Stock Investing.


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