A healthy amount of risk tolerance is important for almost all investors. It allows them to explore a broader range of investments and identify (and take advantage of) more and better opportunities. However, it’s not a viable strategy to develop a portfolio full of volatile assets. A good mix of both low-volatility stocks and relatively aggressive stocks may help you achieve the best results.
There are plenty of low-volatility stocks that offer a solid return potential and consistency, making them ideal candidates for your core long-term holdings. A handful of such stocks in your portfolio can help it sail smoothly, even in a rough market.
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A utility stock
Utility stocks are, in general, safer than many other stock types. But Fortis (TSX: FTS) stands out even among the safe utility stocks. It has a massive customer base (3.4 million) and a geographically diversified footprint. But most importantly, about 99% of its assets are regulated, making its business model incredibly resilient against weak economic conditions and shaky markets.
It’s also Canada’s second oldest Dividend Aristocrat and has been growing its payouts for about 49 consecutive years. In addition to its dividends, the stock offers a modest growth potential, raising its overall returns to a decent level. Fortis stock boasts a beta of just 0.2, making it one of the least-volatile stocks currently trading on the TSX.
A professional services company
Thomson Reuters (TSX: TRI) started out as a newspaper company and stuck to its news and media-related roots for several decades. However, it has pivoted, and the bulk of its revenues now come from the services (and tools) it provides to legal professionals, corporations, and tax professionals.
The company has several competitors for each of its products/individual services, but few companies (if any) offer a comparable range of services, which gives Thomson Reuters an edge.
Since its operating domains are not vulnerable to market movements and, to an extent, even economic downturns, the stock is very stable. It has a beta of just 0.3. It’s also a reliable Dividend Aristocrat, albeit with a relatively small yield.
However, its overall return potential is quite compelling, and it returned over 500% to its investors in the last decade through both capital appreciation and dividends.
A private equity firm
Equity firms like Clairvest Group (TSX: CVG), based on their portfolio of companies, may be exposed to several different market verticals and geographies simultaneously. But that doesn’t make them volatile. In fact, Clarivest is among the least-volatile companies in Canada, with a beta quite close to zero (0.05).
It has grown almost consistently over the past two decades, with a few dips along the way, and has returned over 340% to its investors in the last decade alone, though a sizable chunk of that came from the dividends.
The company has a knack for identifying winning teams/businesses and has added enormous value to dozens of businesses it has acquired/partnered with. This, in turn, allowed it to create value for its investors as well.
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Foolish takeaway
Low-volatility stocks that offer consistent returns and can be held long-term should be an important part of your retirement planning. All three stocks have offered consistent returns, at least over the past decade and their business models. They may continue to perform well, especially if their fundamental strengths sustain and remain relevant.
