The conventional wisdom to “invest in the S&P 500 and forget about it” is not as easy to execute as it sounds. That’s not because of access or costs. The index is widely available through mutual funds and exchange-traded funds (ETFs), many of which charge very low expense ratios.
The challenge lies in investor behavior when risk shows up. For example, from Jan. 29, 1993, to Aug. 22, 2025, a $10,000 investment in the SPDR S&P 500 ETF Trust (ticker: SPY) compounded at an annualized 10.59% with dividends reinvested, growing to $264,826 before taxes.
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That assumes investors stayed the course, which is more difficult than it looks on a long-term chart. Over that period, SPY’s average volatility was 18.7%. In practice, this meant a portfolio that did not grow in a straight line but experienced plenty of ups and downs.
The worst of these were drawdowns, defined as peak-to-trough declines. The maximum drawdown during this period was 55.2% in the 2008 financial crisis, which erased more than half the S&P 500’s value. Losses that began in October 2007 did not recover to their prior high until April 2012.
With hindsight, it may feel easy to say stocks always recover. But imagine being among those who lost their jobs in 2008 while watching their retirement savings fall by half. Could you have stayed the course? If your honest answer is no, it might be wise to de-risk.
That does not mean stockpiling cash. While today’s elevated interest rates make savings accounts attractive, yields will fall once the Federal Reserve eventually cuts rates.
A more strategic way to reduce risk is to use ETFs that deploy quantitative strategies designed to cushion downside. These funds may lag during bull markets, but if they help investors remain invested over the long run, the trade-off may be worth it.
Here are seven smart ETFs that low-risk investors can buy in 2025:
| ETF | Expense ratio |
| Invesco S&P 500 Low Volatility ETF (SPLV) | 0.25% |
| Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) | 0.30% |
| Innovator Equity Defined Protection ETF (ZAUG) | 0.79% |
| FT Vest U.S. Equity Moderate Buffer ETF – August (GAUG) | 0.85% |
| Simplify Hedged Equity ETF (HEQT) | 0.44% |
| Calamos Laddered S&P 500 Structured Alt Protection ETF (CPSL) | 0.79% |
| Calamos Nasdaq Equity & Income ETF (CANQ) | 0.89% |
Invesco S&P 500 Low Volatility ETF (SPLV)
“SPLV holds the 100 stocks in the S&P 500 with lowest one-year trailing standard deviation of returns,” explains Nick Kalivas, head of factor and core equity ETF product strategy at Invesco. “Stocks are weighted by inverse volatility so that the stocks with the lowest volatility get the highest weight, and the process is repeated four times a year.” This ETF features a tilt toward more defensive sectors.
“Since its May 2011 inception, SPLV has had a standard deviation of return 18.9% lower than the S&P 500 and a beta of 0.64,” Kalivas explains. “SPLV’s up and down capture ratios to the S&P 500 have been 67.1% and 60.1%, respectively, highlighting its risk mitigation properties and potential smoother return experience.” The ETF charges a 0.25% expense ratio and pays monthly distributions.
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
“SPHD holds 50 stocks in the S&P 500 with the highest yield and lowest one-year trailing standard deviation,” Kalivas says. “The low volatility screen is used with the expectation of reducing the risk of holding stocks vulnerable to a cut in their dividend.” This ETF is the more income-focused alternative to SPLV, paying a higher 4.6% 30-day SEC yield with the same monthly distribution frequency.
“The stocks in SPHD are weighted by their 12-month trailing dividend yield with a 3% cap per stock and 25% sector limitation,” Kalivas says. This mechanic helps limit concentration risk in SPHD’s relatively narrow portfolio of 50 or so stocks. In practice, the combination of a high dividend yield and low volatility screen gives SPHD a natural value and quality tilt within the S&P 500’s large cap-leaning universe.
Innovator Equity Defined Protection ETF (ZAUG)
“Buffer ETFs help narrow the range of possible return outcomes for the index that it tracks,” says Mark Andraos, partner and wealth advisor at Regency Wealth Management. “Think of them as ‘gutter guards’ when you went bowling as a child; the guard rails help keep you in a specified range.” These ETFs use derivatives to limit the range of returns over a specified time period, capping upside and downside.
Innovator ETFs offers one of the largest lineups of buffer ETFs. ZAUG, for example, is designed to track the price returns of the S&P 500, while mitigating 100% of losses over a one-year outcome period starting Aug. 1, 2025, to July 31, 2026. However, this comes at the cost of a 7.28% cap on upside over the same period and a lack of participation in the S&P 500’s dividends. ZAUG charges a 0.79% expense ratio.
[READ: 9 Best ETFs to Buy for a Recession.]
FT Vest U.S. Equity Moderate Buffer ETF – August (GAUG)
“The cost of paying for the downside protection is capped upside potential,” Andraos says. “If you think the market is poised for a breakout and will rally significantly from its current levels, buffer ETFs may not be suitable as your upside potential will be capped to cover the cost of the downside protection.” However, investors can retain more upside by dialing back the downside protection levels.
GAUG may strike a better balance than ZAUG. This buffer ETF has a one-year outcome period from Aug. 18, 2025, to Aug. 21, 2026. During this time, GAUG will attempt to deliver the price returns of the S&P 500 while buffering against the first 15% of losses, with an 11.89% upside cap. As with ZAUG, investors will not receive any of the S&P 500’s dividends. GAUG charges a 0.85% expense ratio.
Simplify Hedged Equity ETF (HEQT)
Using buffer ETFs effectively requires purchasing the correct fund at the start of its outcome period and holding until the end. If this is unappealing, consider laddered solutions like HEQT. This ETF is benchmarked to the S&P 500 and uses a series of options collars expiring over three sequential months. This caps upside, but ensures an always-present downside hedge that reduces volatility and drawdowns.
“Since its inception on Nov. 2, 2021, to July 31, 2025, HEQT has delivered an annualized return of 8.35% while significantly reducing risk, with realized volatility of 8.8% compared to 18.5% for the S&P 500,” explains Jeff Schwarte, chief equity strategist at Simplify. “Additionally, HEQT’s maximum drawdown of 11.5% is less than half that of the S&P 500’s 24.5%.” The ETF charges a 0.44% expense ratio.
Calamos Laddered S&P 500 Structured Alt Protection ETF (CPSL)
“CPSL is a laddered portfolio of all the monthly vintages of our S&P 500 Structured Protection ETFs,” explains Matt Kaufman, senior vice president and global head of ETFs at Calamos Investments. “Each vintage has a one-year outcome designed to deliver upside to the S&P 500 to a cap, with 100% protection over the outcome period.” Think of CPSL as a “fund of funds” but for buffer ETFs.
CPSL’s structure addresses one of the key concerns some investors have with buffer ETFs, which is timing. Buying a single vintage means the cap and downside buffer only apply if purchased and held for the exact outcome period. “When laddered in a single ETF, you obtain diversification of outcome periods, diversify timing and maturity risk, and smooth upside capture over time,” Kaufman explains.
Calamos Nasdaq Equity & Income ETF (CANQ)
“Correlations break when you need them most,” Kaufman says. “In March 2020, supposedly uncorrelated assets crashed together.” During the early days of the COVID-19 pandemic, the mass panic and liquidity crunch meant traditional hedges like aggregate bonds failed to deliver the protection investors expected. Both stocks and bonds sold off together, undermining the case for simple diversification.
“With options, you have contractual certainty, and that is what a lot of investors are after,” Kaufman says. An example of this in play is CANQ. By devoting around 10% of its portfolio to options with the rest held in fixed-income ETFs, CANQ was able to capture 93% of the Nasdaq-100’s upside with only 65% of the downside in the first few months after its February 2024 debut. Though potential investors should be mindful not to extrapolate too much from that short timeline, this ETF does seek to achieve a few noble objectives, allowing investors to seek Nasdaq exposure while earning income.
[SEE: 9 Highest Dividend-Paying Stocks in the S&P 500]
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7 Smart ETFs for Low-Risk Investors originally appeared on usnews.com
Update 08/26/25: This story was published at an earlier date and has been updated with new information.
