There have been few places to hide for investors this year. Both stocks and bonds have tumbled—since the start of 2022, the Vanguard Balanced fund, a portfolio of 60% stocks and 40% bonds, has lost 13%. Moreover, interest rates are still rising, inflation is on the march, and the stock market continues to gyrate.
Investors have no control over rising rates or slumping markets, but they can even out the movements in their portfolios and potentially boost returns by investing some of their portfolio in alternative strategies that move out of sync with both stocks and bonds. We’ll introduce three of them here: long-short funds, market-neutral funds and managed-futures funds. All are capable of generating positive returns during bleak periods for stocks and bonds; so far this year, many have.
Alternative strategies were previously available only to high-net-worth individuals, institutions or financial advisers. Today, a growing number of alternative strategies are available via mutual funds for mom-and-pop investors. Some money managers are making the case for putting 20% or more of your investments in alternative-strategy funds, depending on your age, circumstances and risk tolerance, given today’s volatile markets.
All nine of the funds we profile here are run by managers who have solid records and—critically for these types of strategies—strong histories of risk management. The funds are all widely available at most brokerage firms, though some may require a transaction fee. Fund expenses tend to be high due to some unusual operating expenses for the strategies and the high skill level of the managers, many of whom come out of the rarefied hedge fund world. Returns are through May 6.
LONG-SHORT FUNDS
This story is from the July 2022 edition of Kiplinger's Personal Finance.
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This story is from the July 2022 edition of Kiplinger's Personal Finance.
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