I have not been a proponent for these strategies, at least not as a long term strategy, but I'm considering selling a couple non-equity fund/ETF's and going that path with some money. Thought I'd reach out to see if anyone else is thinking similarly or has already done so. If so, what would be your suggested choices.
The basis for this is that I think we are in for a fairly long duration of economic whoa and we will be testing new lows in the market over the next year. That's my crystal ball. Some think the S&P 500 may not bottom until the 1500-1800 range. That's an additional drop of 30-40% from Fridays close. Maybe I'm just reacting to my morning coffee and Barron's paper but I certainly don't see a V shape recovery to this 'yet to be announced recession'.
In any case, I'm considering selling my gold ETF and a bond fund and putting that money into one or 2 of these funds. I did some initial research on Schwab and re-read a commentary David had here from Feb. 2019.
My short list:
- NCLIX
- GSSFX (TF at schwab)
- FVALX (TF at schwab)
- RLSFX
- MNWAX a very consistent though muted return trend up in all markets
- BTAL
I refuse to pay the TF so I guess 2 on my short list won't happen, sadly. I'm leaning to the last 2 on the list.
Comments
1. Determining to 'buy' equities is hard enough. They are studies and articles out there that show even the considered best pundit's only get it right half the time. Determining to 'sell them short' is even harder. I'm willing to bet the success ratio here would be considerably lower. Just today, would you buy Tesla or sell it short? Feel free to stick whatever other company name you'd like to into that question.
2. Personally I wouldn't be buying any equity at this time, the uncertainties are just not in my favor. My feelings are that people are indiscriminately selling most anything that isn't nailed down and still presents value. I'd rather wait for things to recover even if I end up paying more.
I noticed BTAL a few days ago during a search for alternative ETFs. Who couldn't help but notice its excellent performance? What is their "secret sauce" and how long will it be until it's "good until it isn't"?
The JPMorgan L/S offerings look pretty good if I decide to stray from target date funds and index ETFs.
I'm a nope, too; with @Mark . Too many spinning wheels; and mood swings/whims of the managers must also be taken into account.
You can build your own long/short/neutral fund.
At times one of the choices will be "long", meaning a better return and at other periods the other choice will be "short", not performing as well. In either case, the anticipated blend return could keep you ahead and no less than "neutral", meaning "flat".
The two choices are AGG (mixed bonds) and QQQ (large cap growth). Below is the average return of both combined, with the assumption that annually one would have to rebalance to maintain a 50/50% mix. I picked these two for the long term data available, and QQQ in particular, as I maintain that large growth will still perform better going forward in the equity world.
YTD = -10.6% (to be determined, eh?)
1 year = +4.8%
3 year = +8.6%
5 year = +8%
10 year = +9.7%
15 year = +8.3%
Life = +5.6% (AGG incep. = Sept. 2003, QQQ incep = Mar. 1999)
Compare these returns to the time periods available for the funds you noted, and then make your choice.
Be well.
Catch
At some point I am planning on doing something quite like this, in my case 1/3 - 1/2 BND (slightly superior to AGG and the others) and the rest in CAPE and VOOG.
Oh, yes. There are other decent choices for a quality bond etf or fund.
Build your own allows for the flex.
@Bitzer, BTAL was the ETF I planned to buy tomorrow. I sure wish you didn't refer to the "secret sauce". Made me cringe
@Mark, @catch22, I've always thought the same way and I know over time a good balanced fund will beat the pants off these alternatives. But, I'm thinking how do I diversify or potentially limit losses over a long recession? Cash for sure. Bonds though scare me and gold ETFs are starting to give me the same feeling where risk may be higher than reward. I hear you though.
While I am certainly not the smartest guy in the room, and while I have tried different assets and strategies, I have pretty much have always returned to equities, treasuries and gold ( and cash). It makes investing manageable for me and I haven’t had many regrets.
I have had CVSIX for many years so I am still ahead with it.
Re: BTAL I took another look at BTAL against my favorite benchmark, VTI. Ok, I know VTI is the wrong benchmark, but that (or a target date fund) is where my money goes without a better (for me) idea.
Taking a look at BTAL for each calendar year of it's existence (ok, I know that's the wrong comparison tool), I see that VTI had greater returns, except for 2018 and 2020 (thus far) when BTAL clobbered VTI.
It looks like BTAL only came to life in the past 6 weeks or so. I'm looking to invest some "fun money" but I think I can do better than BTAL.
Does anyone understand how that fund works?
I'm not looking for a long term holding here. I've always been an advocate against these funds long term (balanced funds will always win is my motto). I'm looking for something that holds up in a recession environment better that straight equities - VTI. I mentioned above, I think bonds are risky and corporate bonds may become even more so. Gold ETFs, "paper" as described by some, may also have more risk than I appreciated and I don't need another IOFAX surprise.
I don't plan to sell any equity funds. Probably to late for that. Just looking for diversification with possibly less risk than bonds and gold ETFs - during this upcoming recession.