Low Risk Fund Portfolios In A High Risk Environment

Jun. 14, 2020 6:53 PM ETEXDAX, FIKFX, SWLRX, SWRSX, TMSRX13 Comments
Charles Bolin profile picture
Charles Bolin


  • With the uncertainty of the economy and markets, investors should remain conservative.
  • Mutual Fund Observer is used to update Top Fund and Category Performance.
  • A "Very Conservative" Model Portfolio is created for short term funds in addition to the three Conservative Model Portfolios.


According to the National Bureau of Economic Research, the U.S. economy entered a recession in February of this year. The S&P 500 is down about 5 percent for both the week and year to date. I don't believe that the full impact of the slowdown or continuing risk of COVID-19 is fully priced into the markets. There are plenty of potential disruptions in the near term including the political rhetoric associated with the election. This article describes a conservative investment approach using Mutual Fund Observer to measure risk (Ulcer Index) and Risk Adjusted Return (Martin Ratio) using the author's Ranking System.

Chart #1: S&P 500 Late Stage of the Business Cycle Performance (Volatility)

Data by YCharts

Don’t trust your own opinion and back your judgment until the action of the market itself confirms your opinion. – Jesse Livermore

Rules Based Investing

I use an Investment Model as shown below to determine how much risk to take in investments following the philosophy of Howard Marks. The solid blue line is a theoretical stock to bond allocation with a minimum allocation of 20% along the guidelines of Benjamin Graham (who used a minimum allocation of 25%). The Model started to show improvement in late 2019 prior to the impact of COVID-19 on the markets. The red line shows the percent of the indicators that are negative and the downturn in the economy is wide spread.

Chart #2: Investment Model

Source: Created by the Author

Chart #3 shows the total return performance of the S&P 500 (green), Vanguard Wellington (red) which represents a traditional 60/40 stock to bond allocation, the Vanguard Wellesley (blue) which is a more conservative 40/60 stock to bond allocation, and the Fidelity Japan Fund (orange) for the past 22 years. For someone nearing retirement, this time period represents an approximate average life expectancy for a 65 year old. I expect a

This article was written by

Charles Bolin profile picture
I use Mutual Fund Observer MultiSearch as the primary tool to analyze and rank funds based on risk, momentum, quality, income, and consistency factors. I classify nearly 300 funds each month by investment buckets for risk and trends. I began contributing to the MFO monthly newsletter in 2019.I retired in June 2022.  I am an individual investor and retired engineer with an MBA.

Disclosure: I am/we are long TMSRX, SWLRX, EXDAX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am an engineer with an MBA nearing retirement and not an economist nor an investment professional. I am long all of the funds in the Model Portfolios. The information provided is for educational purposes and should not be considered as advice. Investors should do their due diligence research and/or use an investment professional. In September 2019, I began contributing to the Mutual Fund Observer monthly newsletter.

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