Low-Volatility Funds: The Wrong Way to Play the Rally?: The Procter & Gamble Company (PG) and More

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Keep value in mind
No matter how fundamentally strong a company may be, its valuation makes a huge difference in whether its stock is a good investment. As interest in low-volatility stocks increases, the pricing discrepancies that result will lead to their valuations rising too high to reap the benefits of the strategy. Given that traditional growth stocks are trading at bargain valuations, you could argue that those disparities already exist.

When they’re not popular, low-volatility stocks can be good buys for risk-averse investors. When high demand makes them too expensive, though, you’ll be better off looking for more out-of-favor strategies that promise similar results.

The article Low-Volatility Funds: The Wrong Way to Play the Rally? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Procter & Gamble.

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