Surviving market storms

Summary: While Nifty 500 crashed 38 per cent in 2020, its low-volatility peer fell just 29 per cent and recovered two months earlier. Is this the smoother ride your portfolio needs? Let's find out. Markets have spent the past 18 months lurching without getting very far. For SIP investors, the reward has been thin: the Nifty 100 and Nifty 500 have delivered only about 4 to 6 per cent annualised returns. The mix of muted gains and sharp swings is beginning to test investor patience. In such phases, strategies promising a gentler ride attract attention. Low-volatility funds are now being pitched as a way to stay invested without enduring the full turbulence. The natural question is whether they offer that relief, especially for those who find wild market moves hard to stomach. But first, what is low-volatility investing? It is a factor-based strategy that selects stocks with lower price swings. Starting with a universe like the Nifty 100 or Nifty 500, stocks with relatively smaller fluctuations (typically measured through one-year standard deviation) are chosen and weighted to form an index, with periodic rebalancing to maintain that profile. The category is still in its infancy. Only about 13 passive schemes exist, most with less than five years of track record. The majority track the Nifty 500 Low Volatility 50 or the Nifty 100 Low Volatility 30