A recent WSJ article mentions the growing investor preference for low-vol funds.
Examples of utility companies are given as low-vol stocks. Strange thing that utilities in general are continued to be considered as low vol even after the PG&E saga. It seems to some extent passive investing leads to a passive acceptance of ingrained stories.
The article mentions USMV as one of the biggest low-vol ETF. However, the biggest holding in USMV, Newmont Goldcorp (NEM) returned -28.31% compared with a gain of 123.30% in S&P 500 from 2008 till Oct 2019.
It's highly debatable that a stock falling 51% in 10 months (2008), rising 161% in 3 years (2008 - 2011), again falling 77% in 4 years (2011 - 2015) can be termed low vol and included in a low vol ETF. It would seem in the name of low-vol, investors are being offered a dash of high-vol too.
Passive investing should not lead to passive thinking and continued critical thinking is required on part of the investors.
Examples of utility companies are given as low-vol stocks. Strange thing that utilities in general are continued to be considered as low vol even after the PG&E saga. It seems to some extent passive investing leads to a passive acceptance of ingrained stories.
The article mentions USMV as one of the biggest low-vol ETF. However, the biggest holding in USMV, Newmont Goldcorp (NEM) returned -28.31% compared with a gain of 123.30% in S&P 500 from 2008 till Oct 2019.
It's highly debatable that a stock falling 51% in 10 months (2008), rising 161% in 3 years (2008 - 2011), again falling 77% in 4 years (2011 - 2015) can be termed low vol and included in a low vol ETF. It would seem in the name of low-vol, investors are being offered a dash of high-vol too.
Passive investing should not lead to passive thinking and continued critical thinking is required on part of the investors.
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