Low Risk, High Reward?

While riskier stocks often catch investors’ eyes, Validea CEO John Reese says that stocks considered safe and boring often produce the best returns.

“For decades, the investment world operated under two key assumptions — that risk is defined by volatility, and that taking on greater risk leads to greater reward. Buy stocks that are risky and, over the long run, the market will reward you with greater returns, the thinking went,” Reese writes in his latest article for Canada’s Globe and Mail. “Recently, however, that thinking has been turned on its head. Last year, at least two academic studies found that low-beta stocks — that is, those that have lower volatility than their benchmarks — have outperformed more volatile high-beta stocks over the long run.”

Reese says investors should consider looking for value among low-beta stocks. He uses his Guru Strategies — each of which is based on the approach of a different investing great — to find some attractive low-beta plays. Click here to read the full article.