After taking a breather in 2013, volatility has returned to the stock market with a vengeance in the first few months of 2014. In January, the CBOE Market Volatility Index (VIX), a popular indicator of stock market volatility and investor sentiment, soared almost 50% before dropping back down in mid-February, and then spiking again in early March. The sudden jump in the so-called “fear gauge,” which is based on near-term volatility conveyed by S&P 500 stock index options, has historically been a sign of increased bearishness among investors.

Many experts believe that similar jolts are likely in the future. Eaton Vance vice president and co-director of investment-grade fixed income Kathleen Gaffney sees stock market volatility returning to “old normal” levels, according to a February report from the firm. In a blog titled “Welcome Back Volatility,” BlackRock chief investment strategist Russ Koesterich cautions that “market volatility is likely to revert back to its longer-term average. As such, investors should consider preparing their portfolios for the rockier road ahead.”

The return to volatility once again puts the spotlight on exchange-traded funds that either profit from or protect against swings in the stock market. These ETFs fall into two broad groups: volatility-linked ETFs based on VIX futures contracts and low-volatility ETFs that focus on the less-volatile corners of the stock market. Both tend to wither or underperform in strong bull markets like last year’s, but do better in more volatile down markets. That’s where their similarities end.

Volatility-linked exchange-traded funds and exchange-traded notes linked to the U.S. market take their cue from the CBOE Market Volatility Index. Like the index, they tend to perform better when markets are more skittish and worse when optimism and calm prevail. With the market’s generally bullish tenor over the last few years, returns on these products have been nothing short of abysmal. The three exchange-traded products based on VIX short-term futures fell around 66% in 2013 alone, and those that employed leverage did even worse.

Another problem is that while these exchange-traded products follow the general pattern of the volatility index, their returns often diverge widely from it. Since investing in the CBOE Market Volatility Index is not possible, most use VIX index futures to replicate its movement. By doing so, they often get caught in a continuous trap of selling maturing contracts before they expire and purchasing more expensive later-dated contracts. This continuous process of rolling into higher-priced contracts, called “contango,” can drive down returns by a wide margin from the index. In 2012, for example, the largest exchange-traded note in the group, the iPath S&P 500 VIX Short-Term Futures ETN (VXX), plunged nearly 78%, compared with a 23% drop for the spot VIX. Exchange-traded products such as the iPath S&P 500 VIX Medium-Term ETN, which uses futures contracts that roll less frequently, experience a less-pronounced contango effect but still aren’t immune to it.

With pricing swings that can reach double digits in a single day, these kinds of exchange-traded products are best used as a tool for sophisticated investors. But there may be better options for those looking for a longer-term hedge against market declines.

Barclays’ S&P 500 Dynamic VEQTOR (VQT) and PowerShares S&P 500 Downside Hedged (PHDG) are based on the S&P 500 Dynamic VEQTOR Index. The rules-based index uses a market-timing mechanism that switches between one-month VIX futures and the S&P 500 index, based on the volatility of the stock market and the implied volatility of the options.

Berlinda Liu, director of S&P Dow Jones Indices, explains it this way on the firm’s Web site:

“When the market is down, it [the index] allocates up to 40% to volatility and expects the gain from the volatility component will more than compensate the loss from the equity component. When the market is up, it reduces its allocation in volatility to as little as 2.5% in order to reduce the hedging cost. It also has a stop-loss function that goes full cash if the index is down by more than 2% over any five-day period.”

While the VEQTOR Index’s returns have lagged the S&P 500 during bull markets—sometimes by a wide margin—it has also been significantly less volatile. Its real strength shows up in bear markets such as that of 2008, when it rose over 21%, compared with a drop of 37% for the S&P 500.

There’s another, more simply constructed group of volatility-conscious ETFs zero in on stocks with low volatility. The largest member of this group, the PowerShares S&P Low Volatility Portfolio (SPLV), tracks the 100 stocks in the S&P 500 that have had the lowest volatility over the last year. From its May 2011 inception through the end of January 2014, the ETF had 98% of the return of the S&P 500 index with only 74% of the volatility, according to Morningstar. The fund’s beta, which measures its sensitivity to changes in the benchmark, was just 0.51.

While the PowerShares ETF draws its ranks from the S&P 500 index, its composition is very different. It has about 25% of its assets in utilities and 20% in consumer staples, while these numbers are only around 3% and 10% in the bogey index.

Like other ETFs in the low-volatility group, this one is likely to fall behind in bullish markets such as that of 2013, when its increase was about 9 percentage points less than that of the S&P 500. At the same time, it’s designed to take less of a hit than broader market averages in bear markets.

Low-volatility stocks have been a good bet for matching or exceeding the performance of broader market averages over the long term with fewer gyrations, according to several studies. But in the past, stocks in defensive sectors such as utilities and consumer staples had cheaper valuations based on price-earnings ratios and other measures than sectors with faster growth prospects, a feature that may have helped cushion price declines. The soaring popularity of defensive sectors such as utilities over the last few years has muted or eliminated that “cheapness,” and today many low-volatility stocks trade at a premium to the market based on price-earnings ratios and other measures.

These stocks also face the challenge of a rising rate environment, which makes their above-average dividends comparably less attractive than what investors can get from bonds and other fixed-income investments. And these slow-growth companies are less able to grow earnings than others in an expanding economy. “While low-volatility stocks will likely continue to offer better risk-adjusted returns than the broad market, their absolute returns may be less attractive going forward,” concluded Morningstar analyst Michael Rawson in a recent commentary.

Nonetheless, proponents say the ETFs have a place in more conservative, risk-averse portfolios, especially with volatility heating up again. “Many clients haven’t forgotten what happened in 2008 and 2009,” says John Feyerer, vice president of ETF product management at Invesco PowerShares. “They are very interested in managing downside risk with low-volatility ETFs. Through time, we believe low-volatility ETFs may provide downside protection, as they have in the past.”

For some traders, low-volatility ETFs can provide a unique way to capitalize on shorter-term blips when the performance of traditionally defensive sectors migrates away from the rest of the market, according to Will McGough, vice president of portfolio management at Stadion Money Management. “There can be periods of dramatic underperformance or outperformance relative to the market by low-volatility ETFs,” he says. “And there are times when they can be very volatile. If you’re trying to track the performance of the S&P 500, this isn’t the way to do it.”

Over the last few years, a number of companies, including iShares, PowerShares, WisdomTree, State Street and Velocity Shares have brought low-volatility ETFs to market. PowerShares and iShares account for nine of the 10 largest members of the group in terms of assets. The iShares broad market U.S. offering, the iShares MSCI Minimum Volatility Index Fund (USMV), draws its portfolio from the least volatile stocks in the MSCI USA Index. Unlike the PowerShares offering, which has no sector constraints, this one limits sector weightings to within 5 percentage points of its benchmark’s. The approach keeps the fund more spread out than the competing PowerShares offering, with utilities representing just 8% of the portfolio.

Emerging markets have also been a popular area for low-volatility funds. The largest entrant in this category, the iShares MSCI Emerging Market Minimum Volatility Index Fund (EEMV), comprises about 200 low-volatility stocks in the MSCI Emerging Markets Index. The ETF has provided some respite for volatility-weary emerging markets investors in down markets.