Low-Volatility Stocks: Beware of This Often-Ignored Risk

People want stocks they can rely on, but you still have to be careful. Find out how.

Jul 4, 2014 at 8:09AM

Investors have gravitated toward low-volatility stocks in order to protect themselves from a future market crash. Yet even though these stocks have their advantages, you need to know one big risk before you make a huge commitment to low-volatility plays.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks more closely at low-volatility stocks. Dan notes that over time, the surprising thing about these stocks is that they've outperformed higher-volatility stocks, even though they have less risk. Right now, Johnson & Johnson (NYSE:JNJ), PepsiCo (NYSE:PEP), and Verizon Communications (NYSE:VZ) are among stocks with relatively little volatility. Yet Dan notes that volatility changes over time, and that in the past, bank stocks Bank of America (NYSE:BAC) and Citigroup (NYSE:C) had relatively low volatility as well. When the financial crisis hit, those bank stocks surprised their shareholders with the depth of their declines. Dan concludes that it's important to be careful with your investing no matter what strategy you use.

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Dan Caplinger owns warrants on Bank of America. The Motley Fool recommends Bank of America, Johnson & Johnson, and PepsiCo. The Motley Fool owns shares of Bank of America, Citigroup, Johnson & Johnson, and PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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