I don’t know about you, but I feel like this year has been the equivalent of 10 years already. And we aren’t even at the halfway mark. There was the ouster and capture of Nicolas Maduro, the Iran conflict, the continuing tariff threats, and the roller coaster ride of oil prices. Despite all of this, the market has been steadily rising.
All of this can cause panic and anxiety in some investors, and fear of missing out (FOMO) in others. In fact, according to a recent report from Coinlaw, 51% of retail investors are influenced by social media‑driven FOMO when placing trades, especially during hype cycles, and panic selling during 2025 volatility led 30% of retail investors to exit positions during major market drawdowns.
How Should Investors Consider Volatility?
The fact of the matter is that volatility is not a bug within markets, but is a feature. Every year sees some rising and falling in major indices, irrespective of whether stocks end the year up or down. It is important for investors to remember this, and brace themselves for the bumpy ride.
Despite this, there are a few things that can make life a little easier when investing. Here are three:
- Time in the market beats timing the market. Beware anyone who tells you they know exactly when to buy or sell stocks. If they knew the precise timing of crashes and upturns, trust me, they would be on a private island somewhere, not hawking tips on social media. In most cases, if investors have a plan, a strategy, and stick to both, they will end up doing ok.
- Diversification is a free lunch. By now, even a casual observer of markets would have noticed that it is a few players leading outsize gains in stocks. At the current moment in which we are, the leaders are AI stocks. No one can accurately predict the future (see point one) but it would not be wildly inaccurate to say that at some point, the cycle will turn. This is why it is important to diversify across sectors, stocks, and asset classes.
- The best time to invest was 20 years ago. The next best time is now. Especially if you have a long time horizon – for example, retirement – if you invest early, your money will have a chance to compound and work for you. In this circumstance, sometimes, volatility can help, especially if you have a steady investment schedule. However, if you are closer to retirement, most people would say that you may still need some equity in your portfolio, but you may want to consider Low Volatility exchange traded funds (ETFs).
What are Low Volatility ETFs?
Eagle eyed readers will feel like they have read this before, and yes, I did write about this in an earlier column. If you missed it, here’s a quick refresher. Low volatility ETFs are designed to absorb some of the shock of volatility, thereby helping you have a smoother experience in a bumpy market. These funds invest in companies that are steadier than their peers – meaning they tend to have lower wild swings in their stock prices. An important thing for investors to remember is that low volatility ETFs could reduce the volatility that you experience, but the volatility will never go to zero. Which means you will experience some volatility, but it will be lower than the broader market.
There are some pros and cons to these products. We list out a few here:
Pros of Low Volatility ETFs:
1. Downside Protection. When markets fall, low volatility ETFs tend to fall less than other traditional equity ETFs. This is because these funds invest in defensive sectors like utilities, or healthcare.
2. Easier for More Anxious Investors. Because these funds tend to not have wild swings, investors who worry when their portfolios rise and fall aggressively might feel better to have these steady-eddy funds in their kitty.
3. Lower Risk. These funds tend to have a lower risk profile than more aggressive strategies.
Cons of Low Volatility ETFs:
1. Limited Upside. Because these funds invest in defensive sectors, they tend to miss the sky-high movements of riskier funds, especially in bull markets.
2. Low Risk, Not No Risk. These funds invest in stocks, that means there will be some risk. Investors should not make the mistake of believing that these funds are entirely risk-free.
3. Not for Short-Term Trading. If you want to get-rich-quick with rapid day trades, these funds are definitely not for you.
If You Want Low Volatility Funds, Consider HVOL and HVOI
For investors who want the comfort of lower volatility, a fund to consider could be the Harvest Low Volatility Canadian Equity ETF, (TSX: HVOL) and its related fund Harvest Low Volatility Canadian Equity Income ETF (TSX: HVOI), which recently completed a year of existence.
HVOL offers a low volatility strategy for a smoother investment experience, holding 40 top Canadian equities, ranked and weighted by their risk score and market cap weight, with a 4% maximum weight per name. The portfolio’s Canadian equities are scored according to risk and fundamental metrics.
Investors who want all of this, and also want regular cash distributions, could consider HVOI, which offers the same portfolio as HVOL, but with an aim to generate high monthly cash distributions through a covered call strategy.
As Harvest ETFs explains it, “Covered call option writing is about striking the right balance. At its most basic level, when you write a covered call option, you gain premiums but can miss some market upside.” You can find out more about covered calls here.
The Final Word
Low volatility ETFs are suitable for investors who cannot, or will not, handle high volatility situations. In my humble opinion, our current times count! If you think you would like to consider these products, you could consider HVOL and HVOI.
Disclaimer
This communication should not be considered as advice and/or a recommendation to purchase or sell the mentioned securities or used to engage in personal investment strategies. Tax, investment and all other decisions should be made with guidance from a qualified professional.
Commissions, management fees and expenses all may be associated with investing in HARVEST Exchange Traded Funds managed by Harvest Portfolios Group Inc. (the “Funds” or a “Fund”). Please read the relevant prospectus before investing. The Funds are not guaranteed, their values change frequently, and past performance may not be repeated. Tax investment and all other decisions should be made with guidance from a qualified professional.
Distributions are paid to you in cash unless you request, pursuant to your participation in a distribution reinvestment plan, that they be reinvested into Class A units of the Fund. If a Fund earns less than the amounts distributed, the difference is a return of capital.
Certain statements included in this communication constitute forward-looking statements (“FLS”, including, but not limited to, those identified by the expressions “expect”, “intend”, “will” and similar expressions to the extent they relate to the Funds. The FLS are not historical facts but reflect the Harvest’s and the portfolio manager of the Funds current expectations regarding future results or events. These FLS are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Although Harvest and the portfolio manager of the Funds believe that the assumptions inherent in the FLS are reasonable, FLS are not guarantees of future performance and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein. The Funds, Harvest and the portfolio manager of the Funds undertake no obligation to update publicly or otherwise revise any FLS or information whether as a result of new information, future events or other such factors which affect this information, except as required by law.
