The stock market has exploded higher over the past 11 months, rebounding sharply from the coronavirus bear market and producing amazing returns. Some stocks have seen their share prices double, triple, or rise even further on optimism from their shareholders about the future course of their underlying businesses.
Yet whenever the market moves up quickly, some investors get nervous about whether a stock market crash is imminent. In order to protect themselves, some of those investors rely on certain types of stocks that are seen to be less volatile than the overall market. But before you go out and buy a bunch of defensive, low-volatility stocks — or a low-volatility ETF that gives you diversified exposure to a whole portfolio of them — you simply have to be aware that they can’t offer complete protection against a market downturn.