Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
I've noticed JHQAX (several others mentioned it) a while ago. This fund seems to offer appealing risk/reward characteristics and it's less expensive than many "alt" funds.
And, JHQAX has successfully proven its mettle over the past 9 years by "providing smoother returns by tempering downside and upside returns via a systematically implemented options strategy".
Of course, it obviously all depends on your personal goals. At this stage of my life, I prefer to err on the side of caution since I don't need a lot more money.
Hence, I prefer to invest in a fund like JHQAX which had a total return of 8.2%, and a modest standard deviation of 8.6%, over the past 5 years. Whereas SPY, for example, gained 12.2%, but had a significantly higher standard deviation of 18.7%.
I find that sleeping well at night is more important to my wellbeing than making a lot of money.
To me it’s all about doing better than cash over the short-intermediate term (approximately 3 years) with a risk profile you can tolerate. It’s not about beating the market or beating @FD1000 - or beating anyone else. It’s not a game. It’s about being able to stay near fully invested - even at an advanced age - and doing better than you would if parked 100% in cash (or cash-like investments). Why bother? Because inflation is unpredictable. Investing in something beyond “0 risk” cash is one way of hedging against an unknown rate of inflation.
All the criticisms of hedging are true. It does cost more and it does detract from your total return. And the various approaches attempted by funds are unpredictable … You think a balanced fund is more predictable? DODBX fell over 33% in 2008.
My purpose in posting wasn’t to find out whether you can make more money by hedging (You can’t). I just wanted to pick people’s brains about whether they ever engage in the practice and, if so, how they go about it. Thanks to all who offered an opinion.
I like your sense of humor Hank...but in all seriousness, I kinda disagree with you when you say it is not a game...if this market isn't the world's largest casino, not sure what it is. The market is NOT a utility. It does not care that someone "needs" 8% a year return to fund their retirement. It's use is to raise capital to grow companies. NOT to provide anyone with a secure retirement.
Dictionary. Game. Definition. a form of play or sport, especially a competitive one played according to rules and decided by skill, strength, or luck
Many "play" the markets....some have more skill/resources than others....for sure it is competitive...someone is always on the other side of the trade...sure...lot of luck involved at times....
Not to digress, active JHQAX had very low distributions but decent portfolio turnover (44% as of 6/30/22 per M*). Distributions shown in M* from 2019 onwards show no year end distributions - I think partly because there were no meaningful redemptions /withdrawals prior to 2022. Some of the otherwise distributable monies are absorbed by the ER (reasonable) and hedging costs, resulting in low distributions per year. There were meaningful redemptions in 2022 but no cap gain distributions, showing the fund kept an eye on tax efficiency. Having said that I would be cautious against holding this in a taxable account. 2022 distributions of JHDAX is illustrative of the potential for cap gain distributions.
"It’s about being able to stay near fully invested - even at an advanced age - and doing better than you would if parked 100% in cash (or cash-like investments)"
You are now going to the other extreme of only cash. There is a lot going on between 0% to 100% stocks. Your goal is to stay invested, my goal is different.
Let's explore several questions 1) How comfortable are you with JHQAX? The following question is the most revealing, what % are you going to invest in JHQAX for the next 20 years? I have more confidence investing in 50/50 PRWCX/VWIAX for many retirees that it meets their goals. In fact, I don't even trust PRWCX, because I don't know how long Giroux will be in charge. This is why my wife has instructions to invest in 3 funds if I'm gone, 2 indexes and VWIAX because I can trust them for decades. 2) You made a good observation, DODBX lost 33% in 2008. But why stop there, stocks+bonds lost over 15% at the bottom of 2022, and many lost over 10% by year-end. In 03/2020, many bond funds lost 10% and stocks over 30% at the bottom. Are you going to get rid of all of them? 3) You made another good point "the various approaches attempted by funds are unpredictable " Bingo. and why I research it for many years. I talked to many people, especially investors who have enough, and most told me they don't want to ever lose more than 10% from any last top, but they still want their portfolio to make a decent return. They must give up either performance or lower risk.
So, just my opinion, good timing/trading is the only choice IF you can do it. Timing doesn't have to be all or none, you can trade 20-30-50%. BTW, I'm almost sure that Fred was probably in high % in MM for months, just like I did in 2022. When markets don't make sense, I'm out. I don't trust any funds/managers and I don't believe in relative performance, only absolute. If 50/50 PRWCX/VWIAX lost about 10-11% in 2022, it doesn't comfort me compared to -18% for SPY. I don't tolerate this decline.
Another subject we must discuss is how much you have in retirement and let's assume no pension. Smaller portfolios must be at a higher % in stocks to survive. WTF portfolio can be in 20/80 to 80/20. The biggest problem is in the middle.
Just received this newsletter regarding KMLM managed futures fund and its rationale for not including equities at all in its trend-following ETF. If I understand correctly, the argument is that trying to short equities, for example, is tantamount to adding to the asset class one is trying to offset or to avoid. Good short read.
BTW, 2022 was one of the easiest years to time markets = sell a big % to MM. We had High inflation, high prices (gas, oil, food, housing, vehicles), terrible supply chain issues around the world, and war in Europe. The Fed screams it will raise rates by several % in the coming months. Lastly, both bond+stock funds go down slowly for weeks letting you sell.
As posted nearby, the AAII Sentiment Bull-Bear spread is at 2.25-yr high.
I am starting to scale my tactical-asset-allocation (TAA) back to normal - for me, 40-60% effective-equity. My TAA had become too high from purchases during 2020-2022.
The idea is hold/buy when Sentiment is VERY negative, sell some when Sentiment is TOO positive.
Personally, no hedging or shorting. Been there, tried that in my working years, but I don't do that now. I do have margin accounts but I don't use margin now.
BTW, low VIX and high SKEW indicate lots of institutional hedging. It's like many institutional bulls are just dancing near the exits. Now, retail investors seem to be joining the party.
I kinda disagree with you when you say it is not a game...if this market isn't the world's largest casino, not sure what it is. The market is NOT a utility. It does not care that someone "needs" 8% a year return to fund their retirement. It's use is to raise capital to grow companies. NOT to provide anyone with a secure retirement.
Dictionary. Game. Definition. a form of play or sport, especially a competitive one played according to rules and decided by skill, strength, or luck
Many "play" the markets....some have more skill/resources than others....for sure it is competitive...someone is always on the other side of the trade...sure...lot of luck involved at times....
Yes, in one sense you are Spot-On @Baseball_Fan. A matter of perspective. When the wind’s blowing hard out to R / L / center field (as now) anyone can be a “star”. But the winds are not always so favorable.
As it may concern another member … Be very careful about dishing out investment advice to individuals. While advice comes cheap, their hard earned money did not. When push comes to shove its their money and their ass hanging out there - not yours.
So, just my opinion, good timing/trading is the only choice IF you can do it.
You are always self promoting this option. Fact is, 90% of every-day investors that try timing methods actually end up with less return over time. That is pretty well documented. Lots of people "think" they can do it, at least initially, but I contend there is a very small minority that actually benefit. I'd be the first to say it hasn't worked for me.
...This fund (JHQAX) seems to offer appealing risk/reward characteristics and it's less expensive than many "alt" funds.
JHQAX has successfully proven its mettle over the past 9 years by "providing smoother returns by tempering downside and upside returns via a systematically implemented options strategy".
I'm definitely on the same page as you guys. I don't expect it to make the same return over 10 years as say the S&P 500, but you can say the same for most balanced, allocation or bond funds too. At my age, a smoother contributor in a portfolio with good upside/downside risk stats is valued.
So, just my opinion, good timing/trading is the only choice IF you can do it.
You are always self promoting this option. Fact is, 90% of every-day investors that try timing methods actually end up with less return over time. That is pretty well documented. Lots of people "think" they can do it, at least initially, but I contend there is a very small minority that actually benefit. I'd be the first to say it hasn't worked for me.
...This fund (JHQAX) seems to offer appealing risk/reward characteristics and it's less expensive than many "alt" funds.
JHQAX has successfully proven its mettle over the past 9 years by "providing smoother returns by tempering downside and upside returns via a systematically implemented options strategy".
I'm definitely on the same page as you guys. I don't expect it to make the same return over 10 years as say the S&P 500, but you can say the same for most balanced, allocation or bond funds too. At my age, a smoother contributor in a portfolio with good upside/downside risk stats is valued.
Well, if you read my posts, I said the following hundred of times. Most should own a limited number of funds (mostly in indexes and low ER) based on their risk and goals and hardy trade. Trading is for a small % who can do it with reasonable success. But, the following MAY work for retirees who have enough and don't want to lose much. They don't care about performance, they care a lot more about NOT losing money. BTW, I never said that JHQAX isn't a good idea. As always the whole portfolio matters more than one fund. Example: suppose someone has 5 funds, each at 20%, he/she can own 20% in JHQAX per their EXPLORE portion.
Basically, there are all kinds of investors, there is no one size fits all. Someone can use one of the following lazy portfolios(link), do nothing for decades and stop reading everything about investing. This site and other investment sites, in contradiction to the Boglehead, are about thinking about other choices.
Trading is for a small % who can do it with reasonable success. But, the following MAY work for retirees who have enough and don't want to lose much. They don't care about performance, they care a lot more about NOT losing money.
Point taken @FD1000. You have said that your timing method isn't for everyone. That is true. And you have said that most should be diversified. But that begs the question, why do you keep posting about your system and trumpeting the great results you have achieved if the majority will lose money with timing. Are you trying to sway them to try when most will lose. Or, are you self-promoting? I have no doubt it works for a small minority. But the majority will never get it right.
Some of your advice is cookie-cutter good. Some, I'm not so sure.
Point taken @FD1000. You have said that your timing method isn't for everyone. That is true. And you have said that most should be diversified. But that begs the question, why do you keep posting about your system and trumpeting the great results you have achieved if the majority will lose money with timing. Are you trying to sway them to try when most will lose. Or, are you self-promoting? I have no doubt it works for a small minority. But the majority will never get it right. Some of your advice is cookie-cutter good. Some, I'm not so sure.
MikeM, please reread my post, I didn't mention or promoted my system. This site is about all kind of investors. From cookie cutter to advance. From very conservative to all stocks with different goals. What you or I think is good, others don't agree so much. 2 Easy examples: 1) If you ask Buffet what stocks you should hold, he will say you just the SP500. Ask 100 financial advisers and none will tell you it's correct. Ask posters on this site and none will say, only the SP500. 2) Tell 100 financial advisers that you hold over 40% of your equities in Apple and they will tell you, it's unacceptable. This is what Buffet holds.
Wanna hedge? Take a look at CCOR which is off 11% YTD.
Why take a look at a loser? What's your point?
Instead, check out JHQAX, for example, which has gained 15.3% YTD, and on top of it has a lower standard deviation than CCOR. JHQAX also has an excellent 9-year risk/reward record.
I’ve watched the fund several years (and owned it in better days) and suspect it will rebound if and when the markets nose-dive. The fund invests in income producing stocks and tries to play defense (hedge) in the options market. It has been burned over the past year. Some missteps obviously. . But looking back at all the negative sentiment a year ago, those missteps are understandable.
I cannot comment on your recommendation @fred495 as I haven’t owned or followed that fund. But, you are free to suggest any hedges you want (reason I started the thread). And I’ll have a closer look at JHQAX and see if it might serve my purpose. The main thing I look for in a hedge is the ability to run opposite the markets (ie go up when the S&P goes down). I suppose some funds do only go up. That would be even better!
@BaluBalu: Thanks for that link. After doing my best to understand what this fund purports to do and how, I wondered if the people in charge might be running a seminar at my local Holiday Inn for people like me.
Maybe I have gotten it wrong, but I think they can earn enough on treasuries( 5%) to make up the money required for all the options they use. So even if all options expire worthless, they are still made whole.
@BaluBalu: Thanks for that link. After doing my best to understand what this fund purports to do and how, I wondered if the people in charge might be running a seminar at my local Holiday Inn for people like me.
LOL. Move to a bigger metro, or jazz up your magazine subscriptions to get out of the Holiday Inn demographic.
Feels like we get two of those dinner offers a week.
Comments
And, JHQAX has successfully proven its mettle over the past 9 years by "providing smoother returns by tempering downside and upside returns via a systematically implemented options strategy".
Of course, it obviously all depends on your personal goals. At this stage of my life, I prefer to err on the side of caution since I don't need a lot more money.
Hence, I prefer to invest in a fund like JHQAX which had a total return of 8.2%, and a modest standard deviation of 8.6%, over the past 5 years. Whereas SPY, for example, gained 12.2%, but had a significantly higher standard deviation of 18.7%.
I find that sleeping well at night is more important to my wellbeing than making a lot of money.
Fred
To me it’s all about doing better than cash over the short-intermediate term (approximately 3 years) with a risk profile you can tolerate. It’s not about beating the market or beating @FD1000 - or beating anyone else. It’s not a game. It’s about being able to stay near fully invested - even at an advanced age - and doing better than you would if parked 100% in cash (or cash-like investments). Why bother? Because inflation is unpredictable. Investing in something beyond “0 risk” cash is one way of hedging against an unknown rate of inflation.
All the criticisms of hedging are true. It does cost more and it does detract from your total return. And the various approaches attempted by funds are unpredictable … You think a balanced fund is more predictable? DODBX fell over 33% in 2008.
My purpose in posting wasn’t to find out whether you can make more money by hedging (You can’t). I just wanted to pick people’s brains about whether they ever engage in the practice and, if so, how they go about it. Thanks to all who offered an opinion.
Dictionary. Game. Definition. a form of play or sport, especially a competitive one played according to rules and decided by skill, strength, or luck
Many "play" the markets....some have more skill/resources than others....for sure it is competitive...someone is always on the other side of the trade...sure...lot of luck involved at times....
Having said that I would be cautious against holding this in a taxable account. 2022 distributions of JHDAX is illustrative of the potential for cap gain distributions.
You are now going to the other extreme of only cash. There is a lot going on between 0% to 100% stocks. Your goal is to stay invested, my goal is different.
Let's explore several questions
1) How comfortable are you with JHQAX? The following question is the most revealing, what % are you going to invest in JHQAX for the next 20 years? I have more confidence investing in 50/50 PRWCX/VWIAX for many retirees that it meets their goals. In fact, I don't even trust PRWCX, because I don't know how long Giroux will be in charge. This is why my wife has instructions to invest in 3 funds if I'm gone, 2 indexes and VWIAX because I can trust them for decades.
2) You made a good observation, DODBX lost 33% in 2008. But why stop there, stocks+bonds lost over 15% at the bottom of 2022, and many lost over 10% by year-end. In 03/2020, many bond funds lost 10% and stocks over 30% at the bottom. Are you going to get rid of all of them?
3) You made another good point "the various approaches attempted by funds are unpredictable "
Bingo. and why I research it for many years. I talked to many people, especially investors who have enough, and most told me they don't want to ever lose more than 10% from any last top, but they still want their portfolio to make a decent return. They must give up either performance or lower risk.
So, just my opinion, good timing/trading is the only choice IF you can do it. Timing doesn't have to be all or none, you can trade 20-30-50%. BTW, I'm almost sure that Fred was probably in high % in MM for months, just like I did in 2022. When markets don't make sense, I'm out. I don't trust any funds/managers and I don't believe in relative performance, only absolute. If 50/50 PRWCX/VWIAX lost about 10-11% in 2022, it doesn't comfort me compared to -18% for SPY. I don't tolerate this decline.
Another subject we must discuss is how much you have in retirement and let's assume no pension. Smaller portfolios must be at a higher % in stocks to survive. WTF portfolio can be in 20/80 to 80/20. The biggest problem is in the middle.
https://kfafunds.com/why-no-equities-in-kmlm-managed-futures-etf/#
https://www.mutualfundobserver.com/2022/10/shining-the-light-into-black-box-funds/
https://www.mutualfundobserver.com/2023/03/to-sell-or-not-to-sell-remix-pqtax-gpanx-cotzx/
BTW, 2022 was one of the easiest years to time markets = sell a big % to MM. We had High inflation, high prices (gas, oil, food, housing, vehicles), terrible supply chain issues around the world, and war in Europe. The Fed screams it will raise rates by several % in the coming months. Lastly, both bond+stock funds go down slowly for weeks letting you sell.
I am starting to scale my tactical-asset-allocation (TAA) back to normal - for me, 40-60% effective-equity. My TAA had become too high from purchases during 2020-2022.
The idea is hold/buy when Sentiment is VERY negative, sell some when Sentiment is TOO positive.
Personally, no hedging or shorting. Been there, tried that in my working years, but I don't do that now. I do have margin accounts but I don't use margin now.
BTW, low VIX and high SKEW indicate lots of institutional hedging. It's like many institutional bulls are just dancing near the exits. Now, retail investors seem to be joining the party.
As it may concern another member … Be very careful about dishing out investment advice to individuals. While advice comes cheap, their hard earned money did not. When push comes to shove its their money and their ass hanging out there - not yours.
@FD1000, You are always self promoting this option. Fact is, 90% of every-day investors that try timing methods actually end up with less return over time. That is pretty well documented. Lots of people "think" they can do it, at least initially, but I contend there is a very small minority that actually benefit. I'd be the first to say it hasn't worked for me.
@fred495, @Observant1 I'm definitely on the same page as you guys. I don't expect it to make the same return over 10 years as say the S&P 500, but you can say the same for most balanced, allocation or bond funds too. At my age, a smoother contributor in a portfolio with good upside/downside risk stats is valued.
BTW, I never said that JHQAX isn't a good idea. As always the whole portfolio matters more than one fund. Example: suppose someone has 5 funds, each at 20%, he/she can own 20% in JHQAX per their EXPLORE portion.
Basically, there are all kinds of investors, there is no one size fits all. Someone can use one of the following lazy portfolios(link), do nothing for decades and stop reading everything about investing.
This site and other investment sites, in contradiction to the Boglehead, are about thinking about other choices.
Some of your advice is cookie-cutter good. Some, I'm not so sure.
This site is about all kind of investors. From cookie cutter to advance. From very conservative to all stocks with different goals.
What you or I think is good, others don't agree so much.
2 Easy examples:
1) If you ask Buffet what stocks you should hold, he will say you just the SP500. Ask 100 financial advisers and none will tell you it's correct. Ask posters on this site and none will say, only the SP500.
2) Tell 100 financial advisers that you hold over 40% of your equities in Apple and they will tell you, it's unacceptable. This is what Buffet holds.
“Good hedges make good neighbors” - for your riskier S&P loaded assets.
Why take a look at a loser? What's your point?
Instead, check out JHQAX, for example, which has gained 15.3% YTD, and on top of it has a lower standard deviation than CCOR. JHQAX also has an excellent 9-year risk/reward record.
Fred
I’ve watched the fund several years (and owned it in better days) and suspect it will rebound if and when the markets nose-dive. The fund invests in income producing stocks and tries to play defense (hedge) in the options market. It has been burned over the past year. Some missteps obviously. . But looking back at all the negative sentiment a year ago, those missteps are understandable.
I cannot comment on your recommendation @fred495 as I haven’t owned or followed that fund. But, you are free to suggest any hedges you want (reason I started the thread). And I’ll have a closer look at JHQAX and see if it might serve my purpose. The main thing I look for in a hedge is the ability to run opposite the markets (ie go up when the S&P goes down). I suppose some funds do only go up. That would be even better!
Thanks. Enjoyed your comment.
ETF TJUL just came to my attention. I have not yet researched it but see if it is useful to you.
https://www.innovatoretfs.com/etf/default.aspx?ticker=tjul
And thanks to @BaluBalu for sharing …
Maybe I have gotten it wrong, but I think they can earn enough on treasuries( 5%) to make up the money required for all the options they use. So even if all options expire worthless, they are still made whole.
Feels like we get two of those dinner offers a week.