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Defensive fund options



  • I would probably opt for STIP for short-term TIP exposure, lower fees 0.05% versus 0.15% and shorter maturity bonds--0-5 years--so less sensitive to rising rates. VTIP also has lower fees. But TIPS in general look pricey right now.
  • You are correct, I inadvertently read off YTD rather than 2021 numbers in some cases. Thanks for spotting my errors!

    SNGVX really did lose almost a full percent, but you have the correct figure for BBBMX.
    GILPX did eek out a 0.02% gain (still effectively zero) rather than lose 0.07%.

    But MERFX did really lose 0.19% (still virtually zero), VNLA did really lose 0.18% (again, virtually zero).

    BSV did worse than I reported, losing over 1% in 2021.

    T-notes (maturities of 2-10 years) saw yields go up by 0.6% to 0.9%:
    2 year rose from 0.11% to 0.73%,
    3 year rose from 0.16% to 0.97%,
    5 year rose from 0.36% to 1.26%,
    7 year rose from 0.64% to 1.44%,
    10 yr rose from 0.93% to 1.52%

    Though yields on T-bills rose only slightly, with the shortest maturity bills even having yields fall:
    1 mo dropped from 0.09% to 0.06%
    2 mo dropped from 0.09% to 0.05%
    3 mo dropped from 0.09% to 0.06%
    6 mo rose from 0.09% to 0.19%
    12 mo rose from 0.10% to 0.39%

    Since interest rates did not move in tandem, how a portfolio was affected depended on its distribution of bonds. Two portfolios with the same average duration could have all bonds of the same, relatively short duration (thus not much affected by rising rates), or a mix of very short term and somewhat longer duration bonds (with the latter losing more value).
  • edited January 2022
    JD_co said:

    Looking at CVSIX (Calamos Market Neutral), the last negative calendar year it had was 2008. The downside is that its 10 year annual return is just over 4%. Maybe a nice Bond fund substitute? It does its job quietly.

    Correction of sorts. My summary of CVSIX earlier was intended to reference a question (above) from JD. However, it certainly would fit in as a “defensive” fund. I use it more as a bond replacement.

    Defensive funds is tough. Under some conditions one type works. But under different conditions another works better. I have 30% allocated to “alternatives.” It’s a group of “the usual suspects”. Can elaborate later if anyone wants to know more.

    One I don’t own, HSGFX, gained 2% today - bucking the nasty selloff. Fine. But you’d be a lot poorer had you held the fund over the past decade. So it goes …

  • +1 Please elaborate on your alt funds. VARAX QGITX BAMBX my best performers all ended flat.
  • edited January 2022
    carew388 said:

    Please elaborate on your alt funds. VARAX QGITX BAMBX my best performers all ended flat.

    FLAT was good today. Congrats!

    4 funds comprise my ALTS. The group lost .75% today - nearly as much as my growth portfolio which lost .80%. I do not consider the ALTS “defensive.” But they exhibit potentially lower volatility than my growth funds as a group. And, as a group, they often diverge among themselves, further reducing daily volatility.

    #1 TMSRX fell .60% today. #2 ABRZX fell .62%. This one isn’t well known. I got into it because I have some $$ directly with Invesco. It doesn’t score well at the rating services. But watching it for a long time, it does seem very uncorrelated to most funds from day to day. So I’m seeing (and liking) something in its daily behavior that’s not evident from a broader perspective. #3 PRPFX fell .82% today. #4 QED is new. I moved some $$ from TMSRX into it a few weeks ago. This company seems to have a decent bunch of ETFs which track various styles of hedge funds thru its own propriatorey indexes. Each fund offering has a different risk & reward profile. This one, QED, attempts to track “event driven” hedge funds and appears to have low to moderate risk / reward. It fell an uncharacteristic .97% today.

    I also have a 7-8% “speculative” sleeve which can be used for just about anything. Currently, it is mostly in TAIL. This fund is designed to run opposite equity markets & stands up particularly well when equities are under stress. It is not a viable long term investment as you would lose $$ over longer periods. Therefore, I cannot recommend it to others. But, it did gain .45% today. I recently added a very small amount of GLDB to the spec sleeve. This etf’s inception was just in May. Very small AUM. It’s a hybrid investment grade bond fund that also invests in gold futures as a hedge. It’s too new and untested to recommend to anyone else. Lost .20% today.

    Happy investing!
  • There is nothing more defensive than a Fund with a large cash hoard. PVCMX will look like a champ if the market corrects here and they pickup the pieces. Cash was near 80% last I saw.

    Its the perfect small-cap fund to gamble on if you view the current market as extremely vulnerable. Its a low-risk fund for now.

    Will the Fed REALLY shake things up here? Next Fed meeting is Jan 25-26th.
  • edited January 2022
    “Will the Fed REALLY shake things up here?” Next Fed meeting is Jan 25-26th.

    They’re caught between a rock and a hard place. I think I can pretty confidently predict some market fireworks in the coming weeks and months - no matter what course they pursue. While they won’t admit it, market behavior will impact their future course of action.

    We tend to dwell on equities, but the playing field is much larger of course. Bonds, mortgage rates, real estate prices, gold, industrial metals, short sellers, short squeezes, derivatives and leveraged bets. Another ARKK or two could send shock waves thru the whole economy. And, let’s not forget crypto. Should be a fun ride.

    Just my humble opinion of course.
  • edited January 2022

    I would probably opt for STIP for short-term TIP exposure, lower fees 0.05% versus 0.15% and shorter maturity bonds--0-5 years--so less sensitive to rising rates. VTIP also has lower fees. But TIPS in general look pricey right now.

    Still not phrasing my question well, evidently.

    Higher fee notwithstanding, TIPX has outperformed those other two competitors handily for 9/5/3/2y, but has trailed, nontrivially but perhaps unimportantly, 1y and less, meaning recently. Was wondering about any informed thoughts as to that, and longer-term prospects for any of them.
  • stayCalm said:

    @wxman123 -- Bank MM funds yield around 0.4 to 0.5%. FDIC insured so 100% risk free. Are you expecting your near cash holdings to provide a higher return?

    Yes, that would be the objective but doesn't always work out. Over the longer term, these "near cash" vehicles should outperform high yield FDIC insured bank accounts, but that's not generally how I use them. I mainly use them in retirement accounts where the only viable, comparable option is near zero MM funds. Over the last 3 years VNLA has earned a total return of 2.39% with very little heartburn. I don't think you could have gotten that even in the highest yielding fully liquid bank accounts.
  • For those interested, T-Mobile money (FDIC insured) is paying 1% on all balances.
  • Thanks for the info hank !
  • edited January 2022
    @davidrmoran The way I think of TIPS is the longer the maturity of the bonds, the less of an inflation hedge they are and the more they behave like regular Treasuries. The duration and rate sensitivity increases with maturity while with a short-term TIP, most of its return will come from the CPI. That of course assumes a normally shaped yield curve and not really weirdly shaped ones where those correlations can be thrown off. I haven't looked at the curve lately, but unless it's really steep and pays a lot of interest for having longer maturities, the shorter the better in a low rate environment like now, especially if inflation is a legitimate concern for you. I know it may not be in your case.
  • @LewisBraham, that is why Vanguard replaced IT/LT TIPS VIPSX with ST TIPS VTAPX a few years ago in its VG target-date fund (TDF) series.
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