where minimum volatility funds should fit into your portfolio

MikeW

Several folks have shared articles on minimum volatility funds recently -- VMVFX being one. In the tumultuous market that we find ourselves in I wondered where such funds should fit into an overall equity strategy. I'd value your thoughts. I'm 10 years from retirement with holdings that are 70% allocated to equities and 30% to fixed income and cash. Do these types of funds make sense as core holdings and if so what % should one consider allocating to them? thanks for the advice.

bartab

Surprised nobody has answered you. I have a 70/30 portfolio and have worked to simplify it. VMVFX is between 20-25% of my equity portion. That will probably increase a little bit. AUENX and PRWCX are my other two. I love VMVFX and consider it great for diversification. Over 500 stocks, mainly mid and large, and names not found in your typical mid and large cap funds. I’m not into international funds that much and this gives me a little of that but not too much. I don’t want any more funds with Amazon, or Microsoft, or Apple or J and J or whatever they all have. I’m 62 and easing it up a little. I figure it this way I let PRWCX do it’s own thing. I combine AUENX & VMVFX and consider it a pretty well diversified set of funds, and add bonds to make it 70/30. Right now that is short term etf’s that I’ll change when rates stabilize.

STB65

I've watched this board for years and seen multiple threads come and go, but this is the fund I've chosen for my grandchildren (who need no bonds) and for my RMDs since my family history of dementia suggests I shouldn't rely on my fund or stock-picking ability. It's low cost, has oversight management that isn't driven by profit for the owners or stockholders, and gives you wide exposure to various markets. (I'm using my SSI payments as my bond funds, ala John Bogle's recommendations.)
Since I know I'm not smarter than people who spend all their time watching and analyzing the market, I'm not going to pick the fund of the decade (or less) or presume that I know which stock is the next Amazon, Microsoft, Apple, Worldcom, or Xerox. Were I you, I'd put most of my stock money in this fund and the amount that I could afford to lose in frontier or emerging markets funds (not just one; and I don't have any suggestions, except that you choose more than one.) If you don't want to take this flier, keep it all in VMVFX.

STB65

BTW, have you looked at VGCAX for your bonds?

expatsp

I've been thinking about VMVFX for when I add to my 401K early next year. It really looks like a buy-and-forget-about-it, hold forever fund.

Sven

I have been invested with VMVFX since inception. Top 10 holdings are invested elsewhere and not the FAANG stocks. This fund has done very well (YTD +1.9%) while the developed and emerging markets funds are in double digit loss! The fund has a healthy % invested in utilities. During the bull markets of international funds such as 2017, this fund trailed the market but hollds its own in down markets such as this year. The Admiral share has a very low ER, 0.17%.

Derf

@Sven: Nice purchase at inception ! I was thinking of a purchase after a year or two after start up , but here I stand with no shares. time to make a purchase. Thanks for your post.
Derf

rforno

Same here. Bought it during its first month not for the 'minimum volatility' aspect but b/c it had an eclectic mix of global stocks and skeed midcap. Very pleased w/its performance to date.

Sven said:

I have been invested with VMVFX since inception. Top 10 holdings are invested elsewhere and not the FAANG stocks. This fund has done very well (YTD +1.9%) while the developed and emerging markets funds are in double digit loss! The fund has a healthy % invested in utilities. During the bull markets of international funds such as 2017, this fund trailed the market but hollds its own in down markets such as this year. The Admiral share has a very low ER, 0.17%.

MikeW

Thanks so much to everyone for responding. With the market turmoil this seemed like a good fund to consider. I want to reduce my risk but still have exposure to the market. Sitting in a money market with more cash is also an option, but then you're trying to play the market timing game which I am awful at. Just comparing this to some indexes -- over the last 3 months this fund is down -4.31 but Vanguard FTSE Developed market ETF and SPY are down -7.79 and -7.94 respectively. @bartab thanks for sharing your allocation % to the fund.

Sven

@Derf, There is still time to add and dollar average into your target allocation. Given the uncertainty from the G20 summit with respect to US and China tariffs, I think there is more ups and downs in the next few months.