UBS released a report telling investors to buy low volatility stocks because the market might get rocky. Might get rocky. The market that dropped four percent last Tuesday for no reason. The market where a single tweet about tariffs can erase a trillion dollars before lunch. That market might experience turbulence.
Low volatility stocks are securities that don't move much. They just sit there. Like a goldfish that's almost dead but not quite. You buy them specifically because they do nothing. This is the investment equivalent of paying someone to watch you sleep. You're not even unconscious for the exciting part.
The entire thesis assumes you can predict when rocky times arrive. If you could do that, you wouldn't need low volatility stocks. You'd just sell everything and buy it back cheaper. But you can't. Nobody can. So UBS wants you to own boring shit all the time just in case. It's like wearing a helmet to bed because you might have a nightmare about falling.
Here's what happens in practice. You buy these stocks in March. The market rips higher for six months. Your low volatility portfolio goes up one percent while your neighbor who bought nothing but semiconductor stocks is up forty percent. He won't shut up about it at the barbecue. You smile and nod. You're hedged against volatility. You're also hedged against making money.
Then October hits. Market tanks. Your stocks only drop half as much as his. You feel vindicated for eleven seconds. Then they both go back up and you're behind again forever.
UBS collected a fee for this research. You'll pay a fee to implement it. The low volatility funds charge fees too. Everyone gets paid except the person who actually wanted protection from rocky times.
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