Trying to parse through a lot of new data and ratios and have quickly learned that I my mathematical grasp of some of the ratios and how useful they are in different scenarios is far below many of you that post here. I am looking to build a portfolio of defensive equity funds that are primarily large cap domestic but adding in a 20% or so weight to international strategies and I'm trying to decide which ratios might be most useful in analyzing potential investments. right now I am leaning towards the following listed in order of importance:
1) Martin Ratio
2) Downside Deviation - chose this over bear market deviation as it seems easier to compare funds of different categories
3) Ulcer Index
4) Sortino
I realize that Martin and Sortino are best used to compare funds that fall into similar categories so I'm not sure how appropriate they are in comparing the domestic to the international strategies. Any help or insights you can give to a newbie would be greatly appreciated.
Comments
Regards,
Ted
https://www.fidelity.com/annuities/FPRA-variable-annuity/defensive-equity-sector-model-portfolios
Conservative Equity Allocation Funds
https://screencast.com/t/rPUmyOlq
Moderate Equity Allocation Funds:
https://screencast.com/t/mugBYO4y
Aggressive Equity Allocation Funds:
https://screencast.com/t/QzdxjX9jkV
You might like to back test some of these choices using Portfolio Visualizer
https://portfoliovisualizer.com/backtest-portfolio
You're looking for a defensive portfolio. I don't know your age, you didn't tell us. "Defensive" will look different, depending on age. If you just want to minimize volatility, check out VMVFX. Vanguard is famous for low fees. Client service leaves something to be desired. So I hear. I don't own Vanguard. The bond funds I own are PRSNX RPSIX and PTIAX. If "defensive" to you--- in terms of bonds--- means high-quality bonds, go with a gov't bond fund with mostly Treasuries. But the old reliable and stalwart DODIX should not be overlooked.
USMV - U.S. equity
EFAV - Europe/Japan (i.e. EAFE)
EEMV - Emerging markets
I believe they "do their job" in tamping down volatility vs. their respective "normal" ETFs (i.e. S&P, EFA, IEMG). My one caveat, and its a suspicion, nothing more: USMV and its component stocks may be "over-owned" at this point. Here/now, I'd probably favor divd-paying/value stocks over USMV. HDV & VYM are 2 examples. IDV & VYMI would be possibilities for EAFE-region stocks.
Generally, UNDER-weighting emerging in favor of Developed Markets would be deemed "defensive" --- but I expect EM to generally outperform over the long-term. There is a cost to being defensive. And it is likely to be lower returns, long-term.
A 4th option, one that I do use in my deferred accounts is Vanguard's Global Min-Vol fund (VMNVX). -- Its volatility and returns compare pretty favorably to the above-cited PRWCX, which is what convinced me to pull the trigger on VMNVX.
Good luck!
If you come to think that a fund which automatically sells and value-buys within the SP500 world every month might be sort-of defensive (not like low-vol funds and ETFs, though), you will want to take a look at DSENX/DSEEX and the etn they are based on, CAPE. There is much deep diving on them within this forum.
www.morningstar.com/articles/942390/a-low-risk-approach-to-the-global-market.
If I were building a portfolio from scratch as the OP seems to be doing, mine would have a healthy slice of global funds, whether it was to be defensive or not. Going into the stock market is kinda “offense minded,” anyway, isn’t it?
VMVFX is a fine fund, too - I've owned it since inception in one of my taxable accts for its global mix and midcap skew, as I could care less about 'minimum volatility' stuff.
I also hold PRWCX and have no intention of selling it unless needed or something changes at TRP.
Portfoliovisualizer.com is a great tool, for people thinking about structuring their portfolio. Relative to this thread, one could choose SPY (the market) as the benchmark, then choose sundry SPDR sector ETFs in alternative portfolios... Punching in XLU (utilities) and Technology (XLK) for example... XLU exhibits a beta of 0.43 vs the S&P. OTOH, XLK exhibits a beta of 1.35. If a min-vol product is NOT overweighting utes and underweighting tech, then its not a min-vol product... I see nothing to "be wary of". Utilities once (in a simpler time) were viewed as "Widow & orphan" stocks -- people seeking relative safety and predictable income.
These min-vol products generally use "algos" to constantly assess betas on their securities are changing. If stocks in the portfolio start to experience increasing levels of volatility, they get replaced. Min-vol products are not for Bogleheads!
Min-vol products often will assess how the collection of stocks assembled in the portfolio behave in concert. So, far example, I noticed very recently, one of the min-vol products (USVM) recently included a gold-mining stock as ONE of its top holdings. Now gold-mining stocks are VOLATILE by themselves, but they tend to make a great hedge --"zigging" when most normal stocks are "zagging" -- thus, in small doses, they help to tamp-down the portfolio volatility. I thought when I saw that "brilliant"!