What are your favorite "downside risk...upside reward" funds?

bee

After the 2009 crash as well as the last two big dips, what funds have allowed you to maintain your position throughout the ups and downs?

I'm thinking Large Cap Value fund like YACKX which managed to avoid big losses and outperformed, in part, due to its ability to avoid losses.

Some funds use cash as a cushion, some hedge, some own diversified assets. I would like to try and build a diversified fund portfolio that manages downside risk without timing the market. Some funds seem overly defensive and miss out on the upside.

Does anyone revisit Fundamental's downside risk portfolio? I believe he referred to it as his "Make More, Lose Less Portfolio".

scott

Marketfield (MFLDX) is a name to consider, as is the much more conservative Sierra Core (SIRIX)

bee

Reply to @scott:

Thanks for your fund choices. Looking at recent new positions for both funds. MFLDX added new positions in the Russell 2000 (IWM), Mexico (EWW), and Franklin Resources (BEN). For SIRIX, they added 20+ year UST (TLT), Motgage Back Securities and Floating Rate Bonds. SIRIX seems to be a fund of funds with a pretty steep ER.

ron

The best downside asset class I know is just plain old cash. I avoid all the funds with fancy names that promise and don't deliver. At age 78 I'm no longer a long term investor.

scott

Reply to @ron: Well, I think you are right and an example of the constant whine on CNBC (which at the moment is having a very "insightful" interview with former rapper Vanilla Ice) as to why people aren't getting into the market. Many would rather be in cash - despite negative real interest rates - than the potential market risk.

Old_Joe

Hey- ron's five years older than me! Makes me feel almost young. I agree with him, too- we're at 40% cash & 33% bonds right now. Gonna be interesting to see if this pullback affords an equity buying opportunity or turns into another debacle like last year.

scott

Reply to @Old_Joe: I can't see myself doing anything much more throughout the Summer, although I'm not reducing risk, continuing to hold individual stocks that cover themes (emerging markets, hard assets and mobile payments), as well as some broader/sector funds and alternative funds (like Marketfield.)

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MaxBialystock

The original question from bee was about downside risk protection. I'm sure I sound like a broken record: MACSX is the one to have for your purposes. Among BALANCED funds, look at BERIX. "Break a leg!"

Investor

Here is one with good (and consistent) upside/downside ratio: GLRBX

Old_Skeet

I'll mention one fund, that comes to mind and that I own, that has performed well in both uptrending and downtrending markets ... It is PASAX, PIMCO All Asset Fund. I have linked its Morningstar report for your easy reference.

http://quote.morningstar.com/fund/f.aspx?Country=USA&Symbol=PASAX

Good Investing,
Skeeter

bee

Reply to @Investor:

Thanks investor. Years ago the guy from "the mutual fund store" recommended this fund on his radio show. I guess he wasn't all bad.

Screening for fund "risk profiles" I came across two other NFT funds, USBSX (USAA Balanced Strategy) and BUFBX (Buffalo Balance). They both have a little more risk and return. Also, HBLYX (Hartford Balanced Income) if someone were able to get institutional shares through their plan or brokerage.

Here are these 4 funds charted over the last 5 years. Yours gives a nice steady ride though, they all seem a little anemic in the rewards department. I added PONDX which is my steady income fund which seems to have perform as well or better than the group.

chart:

http://content.screencast.com/users/smhag/folders/Jing/media/302df69f-f96f-451b-be52-abcbcdee1ed5/2012-05-05_1238.png

bee

Reply to @Skeeter:

Hi Skeeter and all other responders,
Thanks for your ideas.

PASAX seems to share some similarities to PUADX, All asset all Authority that Scott has mentioned.

Here's the following funds (mentioned so far in this thread) charted over 1,3, and 5 years:
PASAX, PAUDX, GLRBX, MFLDX, BERIX, SIRIX, and PONDX

3 year chart:

1 year chart:

scott

Reply to @bee: Pimco AA/AA can short and use leverage. It lost noticeably less in 2008 than All Asset, but gained less than AA in 2009.

perpetual_Bull

"What are your favorite "downside risk...upside reward" funds?"

"Make More, Lose Less Portfolio".

Simple...
VWINX
FPACX
AUXFX
ARIVX
MACSX
PAUDX
ARTGX

kevindow

Hi bee,

Based on my most recent Upside/Downside Capture Ratio calculations relative to VT (2009-2011), my favorites would be the following global funds in order of lowest downside capture: PAUIX (41/7), JNBSX (75/34), PGDIX (85/36), LSWWX (97/53), and MFCFX/HAFLX (123/65). Disclosure: we own significant positions in PAUIX, PGDIX, LSWWX, and HAFLX, and a foothold in JNBSX.

http://socialize.morningstar.com/NewSocialize/ViewPost.aspx?apptype=0&PostID=3179710

Kevin

Sven

Reply to @kevindow: Would you mind sharing how Upside/Downside Capture Ratio is calculated ? Thanks.

MJG

Reply to @Sven:

Hi Sven,

Morningstar calculates the upside/downside capture ratio for its fund universe for various timeframes.

Here is the Link that defines the ratio and how its calculated.

http://www.morningstar.com/InvGlossary/upside-downside-capture-ratio.aspx

At the bottom of the discussion, Morningstar provides access to a more detailed Link. Enjoy, but please be attentive to the caveats. They are important.

Best Wishes.

Sven

Reply to @MJG: Thank you very much.

kevindow

Reply to @Sven:

Here is the complete series of my U/D posts:

http://socialize.morningstar.com/NewSocialize/forums/p/247518/2726535.aspx#2726535
http://socialize.morningstar.com/NewSocialize/ViewPost.aspx?apptype=0&PostID=2929946

http://socialize.morningstar.com/NewSocialize/forums/p/270700/2952905.aspx#2952905

http://socialize.morningstar.com/NewSocialize/ViewPost.aspx?apptype=0&PostID=3179710

Kevin

BobC

2008-2012 have been anything except "normal", and I am not sure we will ever see "normal" again, given the instant-ness of noise and so-called news. This is not to say that buy-and-hold is dead, but it does mean that it is darned difficult to tune out all the noise and stick to one's convictions and long-term plan.

A few managers seem to be pretty observant and pretty insightful, and are not afraid to make changes as needed, and are also not afraid to stick to their guns. Michael Hasenstab, Michael Aronstein, Rob Arnott, Tom Forester, John Osterweis, and a few others come to mind. Then there are a few 'different' funds like PRPFX, FTGWX, LASYX, EIGMX. It would seem that some mix of the above, added to a few diversified bond funds (in addition to TGBAX), like Artio Total Return BJBGX, Loomis LSBDX, Osterweis OSTIX, Thornburg THIFX or LTMIX, U.S. Global NEARX, Federated FGMAX, and others you can pick, should get you through most tough times. Other posters have rightly mentioned VWELX. Find a core group of the forementioned to add to a more aggressive, growth-oriented basket that fits your sleep factor.

Perhaps the most important factor is to turn off the talking heads, whether they are investment or political in nature. Most of them are not very intuitive, some of them are actually amazingly ignorant of basic economic/investment ideas. Investors have always looked for an easy solution to avoiding losses. But sometimes doing nothing is as good as thrashing around, spending hours and hours, and ending up about about the same place where the person who does nothing. There really are ways, however, to reduce downside volatility in a longer-term perspective that make sense for most of us.

bee

Reply to @MJG:

Thanks MJG,

I also was not aware of this tracking tool...a rear view window statistic tool but, we have a great set of historical data points to look back at.