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M* has what looks like an absolute risk scale (1-100) for funds. Unlike its category risk scale (low, below average, ..., high), funds are not measured against their peers.
The methodology talks about target allocation benchmarks, but from what I've seen these "portfolio risk scores" are not rescaled according to fund type. Equity funds are inherently more risky and thus always seem to rate mid to high scores. Ultrashort funds seem to always score in the single digits regardless of their risk relative to peers.
RPHIX - 4 CBLDX - 5 DHEAX - 6
This ordering comports with my understanding of their relative risks. The Dave Sherman funds are managed to have very little volatility.
CBLDX has a longer effective maturity (1.01 years) and higher volatility (1.57) than RPHIX (2.7 - 6.8 months and 0.80 respectively).
DHEAX has a higher standard deviation of 2.38, and an effective duration of 1.47 years. Even without considering that a fund's duration is shorter than its maturity, this is already longer (worse) than CBLDX's 1 year effective maturity. It had a worse drawdown in March 2020 and lost money in 2022 while the other funds have never had a losing calendar year.
Portfolio Visualizer confirms the relative rankings, Feb 2018-Nov 2024, the funds' std deviations are 0.92, 2.76, and 4.27 respectively, while max drawdowns are 1.09%, 5.50%, and 9.74% respectively.
Since 2022,M* has gone through refinements of MPRS. There was an update in 10/2024. I like this absolute risk system better than old M* within-the-categories risk parameters. https://pdfhost.io/v/E..d~yHtX_MStar_MPRS_102024
MFO Risks are also absolute RPHIX 1 CBLDX 1 DHEAX 2
Only money market fund and treasury will not loss value in severe drawdowns. There is always risk investing in stocks and bonds. The realistic question is what is the recovery duration. During spring 2020 COVID drawdown, just about all bonds fell. Many fully recovered within one to six months after the FED cut the rate by 75 bps. Without the cut, the recovery would take take much longer.
Comments
The methodology talks about target allocation benchmarks, but from what I've seen these "portfolio risk scores" are not rescaled according to fund type. Equity funds are inherently more risky and thus always seem to rate mid to high scores. Ultrashort funds seem to always score in the single digits regardless of their risk relative to peers.
RPHIX - 4
CBLDX - 5
DHEAX - 6
This ordering comports with my understanding of their relative risks. The Dave Sherman funds are managed to have very little volatility.
CBLDX has a longer effective maturity (1.01 years) and higher volatility (1.57) than RPHIX (2.7 - 6.8 months and 0.80 respectively).
DHEAX has a higher standard deviation of 2.38, and an effective duration of 1.47 years. Even without considering that a fund's duration is shorter than its maturity, this is already longer (worse) than CBLDX's 1 year effective maturity. It had a worse drawdown in March 2020 and lost money in 2022 while the other funds have never had a losing calendar year.
Portfolio Visualizer confirms the relative rankings, Feb 2018-Nov 2024, the funds' std deviations are 0.92, 2.76, and 4.27 respectively, while max drawdowns are 1.09%, 5.50%, and 9.74% respectively.
https://pdfhost.io/v/E..d~yHtX_MStar_MPRS_102024
MFO Risks are also absolute
RPHIX 1
CBLDX 1
DHEAX 2
MFO Ranks & Ratings are within the categories.