June 20, 2013 — In the past five years many investors have bemoaned the fact it can be more challenging to properly diversify portfolios, in that many investments have a distressing tendency to decline in tandem with other investments.
As shown in the charts below, many securities (including the SPX Index, GLD ETF, SLV ETF, EEM ETF, and MSCI EAFE Index) all declined by 2.5% or worse today.
On the other hand, three volatility indexes (VXEEM, GVZ, and VXSLV) rose by more than 30% today. Regarding investable instruments, the VIX July futures rose 2.04 points today. www.cboe.com/VIX.
While the volatility indexes listed above are designed to be measures of expected future volatility, they are not designed to be benchmarks for investable performance. The two indexes in the chart below are designed to be benchmarks for investable performance, but investors should do plenty of research prior to investing in instruments related to the indexes below, in that, for example, there can be high costs involved with the rolling of VIX futures at times when VIX is in contango.
Please visit www.cboe.com/volatility for more information on how volatility-related instruments can help with risk management diversification strategies.