What are Volatility Managed Funds?
A volatility-managed fund is a mutual fund created around managed volatility strategies.
These funds are most frequently actively managed, which means that a fund manager makes investment decisions about which securities to buy and sell.
Managed volatility funds strive to deliver returns close to or surpass a certain market benchmark but with less risk.
Additionally, these funds are frequently equity-focused, which means they usually concentrate most of all the holdings on the stock rather than bonds.
Those stock holdings can be diversified beyond small-cap, mid-cap, or large-cap companies, growth stocks and value stocks, and domestic or international companies.
These funds can also invest in blue-chip stocks, delivering reliable returns and regular dividends.
What is Managed Volatility Investing?
Managed volatility investing helps investors separate themselves against wide swings in the stock market.
Managed volatility investing aims to continue delivering high returns; simultaneously, the risks that interfere with the stock market are minimized.
It helps provide stability with your investments while making its return profile more efficient, despite what is happening with stock prices.
How to Invest in Managed Volatility Funds?
The primary step is finding a reputable broker that offers these funds.
Once you have found a few brokers, compare their offerings to see which one meets your investment goals and objectives.
Once you have selected a broker, open an account and fund it. Then, you can begin researching the different managed volatility funds available and decide which ones you want to invest.
Many managed volatility funds require a minimum investment, so check the requirements before investing.
Check out the fund’s underlying holdings to determine how or if assets are disseminated across diverse sectors and market capitalizations.
Afterward, compare those holdings to your current asset mix to determine if introducing managed volatility funds would increase diversification, improve returns and get some of the risks out of your portfolio.
Pros and Cons of Managed Volatility Funds
Before investing in managed volatility funds, it is essential to understand the potential pros and cons.
PROS
- These funds aim to minimize risk while still delivering high returns, which can appeal to investors.
- Managed volatility funds can help diversify your portfolio and improve returns.
- These funds are equity-focused, which means they offer the potential for high returns.
- The risks associated with this kind of fund are less than those not relying on this strategy.
CONS
- Managed volatility funds are actively managed, which means they come with higher fees than index funds or ETFs.
- It is more expensive to invest in than other fund options.
- The strategy of these types of funds can be complex, so it’s important to understand how they work before investing.
- Regarding the minimum initial investment, some managed volatility funds can have a higher barrier to entry.
- If the fund's track record is shorter, discerning how skilled the fund manager is at creating investment calls becomes more difficult.
Final Thoughts
Volatility-managed funds can be a great way to diversify your portfolio and improve returns.
However, it’s important to understand the risks involved before investing.
Be sure to compare different managed volatility funds and select one that best meets your investment goals and objectives.
FAQs
1. What is a volatility-managed fund?
A volatility-managed fund is an investment fund aiming to deliver high returns while minimizing risk. These funds are equity-focused and often invest in stocks rather than bonds.
2. What is managed Volatility investing?
Managed Volatility investing is a strategy that seeks to separate investors from wide swings in the stock market. It aims to deliver high returns in a portfolio while minimizing the downside risks that can trigger losses.
3. What are the benefits of managed volatility funds?
Some benefits of managed volatility funds include the potential to deliver high returns, diversify your portfolio, and get some of the risks out of your investment mix.
4. What are the pros and cons of managed volatility funds?
Some pros of managed volatility funds include the potential to deliver high returns and diversify your portfolio. However, these funds have some risks, such as higher fees and a complex investment strategy.
5. How do I invest in a managed volatility fund?
To invest in a managed volatility fund, you must open an account with a broker that offers these funds. You can begin researching the different managed volatility funds available and decide which ones you want to invest in once you have funded your account. Many managed volatility funds require a minimum investment, so check the requirements before investing.
