MSCI Minimum Volatility Index ETFs


Tried to find a similar discussion on here but seems this has not been discussed before: what do you guys think about minimum volatility index ETFs, such as VMVL, MVOL or similar.

  • IIUC the advantage is less volatility (which is, well, the main promise of these indexes) while still making similar returns in the long term (long-term graphs seem to acknowledge this). So this sounds like a great way to reduce risk without giving up gain (or is this too good to be true?).
  • Disadvantages seem to be higher TERs, spreads, less liquidity, less diversification (fewer stocks). Also, it seems not to be so popular in the US as I couldn’t find a US based Vanguard ETF (they have a fund, VMVFX, though) - seems to be more en vogue in europe (where the fees are all higher).

Would it make sense to put say half of the stock etf portion into such minimum volatility ones?

I don’t know much about those guys, but my intuition tells me that there’s no such thing as a free lunch. There must be some costs that long term will drag returns.

MSCI World Minimum Volatility returned slighly more than standard MSCI World in the past

Will that last in the future? Don’t know.

Truth be told,I find the momentum tilt far more appealing, as it appears as if it’s a methodology which filters out underperformers.

absolutely, and I think not the least is hidden in higher TERs.

But even if there is a small cost, I see it as an interesting tool to reduce volatility

Fair question.

IMHO that works fine if there’s not a lot of volatility and there is indeed clear momentum plays - like was the case recently.

The price you pay though might be higher risk - eg currently it is holding 79.3% US stocks (vs 63.5% in the min-vol one) - cleary it was the US that was having a momentum recently. I’m just wondering if that’s not gonna bite once the tide turns… (same argument applies though for min-vol, as perhaps those stocks that had less volatility all of a sudden have more going forward, who knows)