Investing is a secure way to build wealth over the years. However, not everyone is capable of dealing with market volatility.
In the United States, there is a wide variety of less volatile investment options that can help reduce risks and provide financial security.
This guide explores the main alternatives for those who wish to invest with more predictability and less turbulence.
Why Choose Less Volatile Investments?
Market volatility is quite challenging, especially for conservative investors or those who rely on the income from their investments to cover expenses.
Here are the main reasons to choose this type of investment:
- Protection against major losses: Reducing exposure to sharp market fluctuations.
- Greater predictability: Achieving more consistent returns over time.
- Long-term wealth building: Benefiting from sustainable growth without the stress of daily volatility.
- Suitability for more conservative profiles: Excellent for retirees and investors who seek to preserve capital.
Main Less Volatile Investment Options in the U.S.
1. U.S. Treasury Bonds
U.S. Treasury bonds are widely considered safe investments as they are issued by the federal government.
There are different types of bonds available:
- Treasury Bills (T-Bills): Short-term, maturing in up to one year.
- Treasury Notes (T-Notes): Medium-term, with maturities between two and ten years.
- Treasury Bonds (T-Bonds): Long-term, with maturities over ten years.
2. Low-Volatility ETFs (Exchange-Traded Funds)
ETFs are funds traded on the stock exchange that track a market index.
Some ETFs are specifically designed to minimize volatility by investing in stocks of more stable and resilient companies.
Examples of low-volatility ETFs include:
- iShares MSCI USA Minimum Volatility ETF (USMV)
- Invesco S&P 500 Low Volatility ETF (SPLV)
These funds help reduce risks by selecting companies less prone to major price fluctuations.
3. Real Estate Investment Trusts (REITs)
REITs are a popular way to invest in real estate without having to buy physical properties.
They allow investors to earn passive income through the rental of commercial, residential, and industrial properties.
Well-established REITs typically offer consistent dividends and lower volatility than the traditional stock market.
Key examples include:
- Realty Income Corporation (O)
- Simon Property Group (SPG)
- Vanguard Real Estate ETF (VNQ)
4. Defensive Stocks
Companies in the consumer staples sector are good investments, such as those in health and utilities.
Here are stock tips:
- Johnson & Johnson (JNJ) – Health sector
- Procter & Gamble (PG) – Consumer goods
- Duke Energy (DUK) – Utilities
5. Certificates of Deposit (CDs)
Certificates of deposit are a safe investment alternative offered by banks and credit unions.
They function like a high-yield savings account but require the money to be invested for a set period.
CDs offer guaranteed returns and are insured by the FDIC.
6. High-Quality Corporate Bond Funds
Corporate bonds are debt securities issued by companies to raise capital.
High-quality bonds, known as “investment-grade bonds,” are issued by financially solid companies and have a lower risk of default.
Funds like the Vanguard Total Bond Market ETF (BND) offer a diversified portfolio of corporate and government bonds, ensuring greater stability for investors.
Strategies to Reduce Portfolio Volatility
- Diversification
Distributing investments across different asset classes, such as stocks, bonds, and real estate, can reduce exposure to risks specific to one sector. - Dividend Reinvestment
Companies and funds that pay dividends can generate a steady income stream, helping to smooth out the effects of market volatility. - Asset Allocation
Adjusting the proportion of stocks, bonds, and other investments based on financial goals and risk tolerance is essential to maintaining stability. - Long-Term Investment
Avoiding emotionally driven decisions and focusing on the long term can help reduce the impact of short-term volatility.
Is It Worth Investing in Less Volatile Assets?
Less volatile investments are an excellent option for those seeking stability, predictability, and capital preservation.
While they may not offer the quick and high returns of riskier assets, such as technology stocks or cryptocurrencies, they provide security and sustainable growth over time.
In the United States, investors have various options to reduce portfolio volatility, from Treasury bonds and REITs to low-volatility ETFs and high-quality corporate bonds.
If your goal is to invest with less stress and greater financial security, considering these assets could be an essential step in building a solid and resilient portfolio.