By Andy Serwer

Are there any trends that seem certain in markets right now? Anything at all that seems likely to be sustained with a clear path forward over the balance of the year?

While certainty appears to be in short supply these days, one constant has been with us during the short duration of President Donald Trump's second term: volatility. To wit: Look no further than the VIX, or the Cboe Volatility Index, also known as Wall Street's fear gauge, which measures the expected volatility in the S&P 500 over the next 30 days using options prices on the index. The VIX recently soared above 65 in intraday trading this week, the highest since August, according to Dow Jones Market Data. The highest intraday level on record was set during the 2008-09 financial crisis when the index reached 89.

Some prognosticators say the VIX spiking is a signal to buy stocks. While it does appear that stocks rally after the VIX peaks, the devil is in the details. For instance, how does one know when the VIX hits a high?

So why guess. In volatile times, wouldn't it make sense to simply buy the VIX itself?

The answer is yes, but doing so doesn't seem particularly advisable. First, the VIX is simply an index. Similar to the S&P 500 index, investors can't buy it directly. Doing so entails purchasing an exchange-traded fund, which is where the complications begin.

For one thing, some VIX index investments aren't actually ETFs. Rather, they're ETNs, or exchange-traded notes, which are similar to their ETF cousins except that they don't own equity securities. Instead, they are debt instruments issued by banks, with their value tied to the performance of the underlying index. As such, they carry credit risk.

What could go wrong? Plenty. In February 2018, an ETN called the VelocityShare Daily Inverse VIX Short Term blew up during an episode of volatility that according to a Reuters report was "dubbed 'Volmageddon,' taking with it nearly $2 billion in investor assets."

There are a dozen or so VIX ETFs with a total of a few billion dollars under management that are offered by the likes of Barclays and ProShare Advisors. But further complicating matters is that VIX ETNs and ETFs offer exposure to different time periods: short-, medium-, or long-term. Deciding which time period to pick seems vexing.

As if you needed more warnings, Fidelity, which offers these securities for customers to buy, warns that 1.) VIX ETFs "do a lousy job emulating the VIX index...and over periods of a month or a year, the return pattern of VIX ETFs will differ radically from that of the VIX index" and 2.) "VIX ETFs tend to lose money -- significant money -- in the long run." Oh, that.

In conclusion, Fidelity notes that "VIX ETFs are emphatically short-term tactical tools used by traders."

Having said all this, some of these funds have rocked it this year. The 2x Long VIX Futures ETF is up 117%, while both the ProShares VIX Mid-Term Futures ETF and the iPath Series B S&P 500 VIX Mid-Term Futures ETN are up about 24%. The S&P 500 is down some 15%. On the other hand, the Simplify Volatility Premium ETF is down 26%.

If all of this has your stomach churning, note that there are other vehicles available that offer some hedging for the faint of heart.

"I feel like it's kind of a bit under reported, just how well minimum volatility or low-volatility stock ETFs have held up during the recent market conditions," says Ryan Jackson, senior manager research analyst at Morningstar. "These are long-only stock ETFs that are built around some sort of low volatility objective." Jackson points to the Invesco S&P 500 Low Volatility ETF, down 1.3%, and the iShares Edge MSCI Min Vol USA ETF, down 2.5%, both of which had until recently been flat for the year, as two examples.

A category where some investments have fared even better is equity market neutral funds, which look to generate positive returns regardless of an up or down market (usually by going long and short on stocks and or derivatives), where the likes of the AQR Equity Market Neutral N is up 7.5% year to date, or Bridgeway Global Opportunities Fund N, has edged up 1.5%, according to Morningstar.

None of the low volatility or market neutral funds are barn burners like some of those VIX ETFs have been, but neither are they burning down your portfolio like some stocks have.

Remember, too: If the news changes (Trump cancels all tariffs, for example), you may wish you had stayed 100% invested in the S&P 500 or the Magnificent Seven for that matter.

Write to Andy Serwer at andy.serwer@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 09, 2025 02:30 ET (06:30 GMT)

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