3 Low-Volatility ETFs for Peace of Mind in Turbulent Times

Key Points

• ETFs aiming for low volatility can take multiple approaches, including screening for stocks that are less susceptible to market turbulence or focusing on bonds.
• LVHI is a rare low-volatility fund that has a strong track record of performance YTD on top of a healthy dividend yield of around 4%.
• JEPI's overlayed options approach on top of a low-volatility S&P 500 stock strategy has caused its dividend yield to soar above 8%.

Amid confusion about the future trajectory of the war in Iran, the possibility of a continued ceasefire, and the potential implications for the price of oil—and the market in general—it's understandable that many investors may be seeking stability. During a volatile time, it may make sense to turn to exchange-traded funds (ETFs) that are designed specifically to have lower volatility.

Under normal circumstances, and certainly during a bull run, investors might generally shy away from low-volatility ETFs except as a defensive play. After all, these funds are designed to not move much despite what may be going on in the market—and when there are opportunities for gains, it means that these ETFs may be left behind. But they can shine when turbulence threatens to wipe away returns built over an extended period.

LVHI Offers Both a Strong Dividend and Defense Against Volatility

The Franklin International Low Volatility High Dividend Index ETF BATS: LVHI follows an index of equities selected for their combination of high dividends, steady earnings, and low volatility. The size of the portfolio is fairly flexible and ranges from around 50 to 150 stocks at any given time, allowing for flexibility depending upon how stocks may change over time relative to the screening process.

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LVHI is notable because it focuses exclusively on stocks based in developed markets outside of the United States. Investors with a bias toward domestic equities may find that LVHI can provide excellent diversification in this way, although many of the top stocks in the portfolio—energy sector giant Shell PLC NYSE: SHEL and pharmaceutical leader Novartis NYSE: NVS, for instance—are likely to appear in some investment portfolios already.

Despite selecting for low volatility, LVHI has an impressive return so far in 2026, gaining almost 12% year-to-date (YTD). Its 4.1% dividend yield also reflects its commitment to high-yield names, potentially providing an attractive dual benefit for investors. Its expense ratio is 0.4%, which may be fairly modest given its recent performance.

A Combination of Low-Volatility S&P Names and Call Options for Income

Illustrating that there are multiple ways to aim for low volatility, the JPMorgan Equity Premium Income ETF NYSEARCA: JEPI takes a two-fold approach, selecting stocks based on this criterion while also overlaying an options strategy in a bid to provide monthly distributions. Call options may cap the gains that the fund can win if its holdings should experience a rally, but the defensive nature of the fund means that it prioritizes steadiness of dividends instead.

JEPI is an actively managed fund, making its annual fee of 0.35% all the more compelling. At the same time, it has achieved a dividend yield of 8.3%, showing the success of its options overlay approach. The fund's portfolio of more than 100 stocks draws on names from the S&P 500, making its strong yield all the more attractive relative to other equities-focused funds aiming to provide healthy dividends.

Unsurprisingly, given its income focus, JEPI does not have a particularly strong history of returns, although it has outperformed the S&P 500 YTD, based off a gain of under 1%.

A Middle-of-the-Road Approach to Balancing Bond Yields and Risk

Yet another approach to minimize volatility for investors concerned about turmoil in the market is to avoid equities entirely. The iShares 7-10 Year Treasury Bond ETF NASDAQ: IEF invests in intermediate-term Treasurys, a segment of the bond market that lies in the middle of interest rate sensitivity. This means that IEF is not the most defensive bond fund an investor could choose, but it may find a sweet spot balancing yields against risk for those with the appetite.

This approach translates to a fairly strong dividend yield of 3.8% which can be achieved for a modest expense ratio of 0.15%. Interest rate risk is, of course, separate from market volatility but deeply linked, although short-term volatility may not be reflected immediately in interest rate concerns.

IEF's risk/yield balance may be attractive for many. However, investors should be aware of their own tolerance for risk, and those seeking to really minimize risk might look to an alternative focused on shorter-term Treasurys. Another fund from the same provider, the iShares 1-3 Year Treasury Bond ETF NASDAQ: SHY is one example. For the same annual fee, SHY takes a different slice of the Treasury space, giving up only a bit of its dividend yield in the process (SHY's dividend yield sits at 3.7%).