Anyone hold any defensive funds in their portfolio?

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ChinchillaWhiplash
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Anyone hold any defensive funds in their portfolio?

Post by ChinchillaWhiplash » Wed Mar 28, 2018 2:30 pm

Was looking at some defensive funds like VPU Vanguard Utilities ETF ER 0.10 or VDC Vanguard Consumer Staples ETF ER 0.10. Anyone hold any of these? Would think these could cushion the blow of large market downturn a bit. Thoughts? Any other funds in this category?

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unclescrooge
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Re: Anyone hold any defensive funds in their portfolio?

Post by unclescrooge » Wed Mar 28, 2018 2:45 pm

Intermediate bond fund.

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nisiprius
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Re: Anyone hold any defensive funds in their portfolio?

Post by nisiprius » Wed Mar 28, 2018 2:51 pm

Vanguard Total Bond Market Index Fund. Bonds have worked. Yes they have dragged down portfolio returns considerably, but in return they actually have cushioned the blow in downturns. In 2008-2009, they cushioned it a lot, not "a bit."

Sectors and "tend-to's" are unreliable, and not very powerful even when they do work. "Counter-cyclical" and "defensive" are, IMHO, marketing terms.

Everyone would like to find some magic stocks that give us the return of stocks without the risk of stocks. Doesn't that sound too good to be true? There may be differences, but they are small.

Larry Swedroe, "Rules of Prudent Investing:"
In 'The Quest for Alpha,' p. 156, Larry Swedroe wrote:#17: Owning individual stocks and sector funds is more akin to speculating, not investing. The market compensates investors for risks that cannot be diversified away, like the risk of investing in stocks versus bonds. Investors shouldn't expect compensation for diversifiable risk--the unique risks related to owning one stock or sector or country fund. Prudent investors only accept risk for which they will be compensated with higher expected returns.
Last edited by nisiprius on Wed Mar 28, 2018 2:57 pm, edited 1 time in total.
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PFInterest
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Re: Anyone hold any defensive funds in their portfolio?

Post by PFInterest » Wed Mar 28, 2018 2:56 pm

yes, they are called bonds. total bond, int tax exempt.

gundlached
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Re: Anyone hold any defensive funds in their portfolio?

Post by gundlached » Wed Mar 28, 2018 3:00 pm

ChinchillaWhiplash wrote:
Wed Mar 28, 2018 2:30 pm
Was looking at some defensive funds like VPU Vanguard Utilities ETF ER 0.10 or VDC Vanguard Consumer Staples ETF ER 0.10. Anyone hold any of these? Would think these could cushion the blow of large market downturn a bit. Thoughts? Any other funds in this category?
I used to. Have accepted that these are unreliable as a "cushion". I suspect that, like me, you are noticing how great these two sectors have done in a falling interest rate environment. I suspect that the next twenty years, however, might not look like the last twenty. Ymmv.

Only foolproof cushion is to reduce exposure to stocks.

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munemaker
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Re: Anyone hold any defensive funds in their portfolio?

Post by munemaker » Wed Mar 28, 2018 3:02 pm

ChinchillaWhiplash wrote:
Wed Mar 28, 2018 2:30 pm
Was looking at some defensive funds.
VBTLX

ThrustVectoring
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Re: Anyone hold any defensive funds in their portfolio?

Post by ThrustVectoring » Wed Mar 28, 2018 3:51 pm

Doing better in downturns is easy - just hold more cash or bonds and lower your exposure to market beta that way.

And if low-volatility stuff has better risk-adjusted returns than the stock market as a whole, then that implies someone who is 100% equities would be better off levering up on low-vol stocks instead.
Current portfolio: 60% VTI / 40% VXUS

scone
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Re: Anyone hold any defensive funds in their portfolio?

Post by scone » Wed Mar 28, 2018 3:53 pm

Cash and Treasuries: VGIT, FIBAX. 8-)
"My bond allocation is the amount of money that I cannot afford to lose." -- Taylor Larimore

JBTX
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Re: Anyone hold any defensive funds in their portfolio?

Post by JBTX » Wed Mar 28, 2018 3:57 pm

Both Vanguard Wellsley income and Wellington, they could be regarded as defensive
Vanguard 60/40 Index Blend
A couple of Low Volatility ETFs
FPA Crescent (yes, high ER)
Vanguard Dividend Growth and Dividend Appreciation ETF

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Sandtrap
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Re: Anyone hold any defensive funds in their portfolio?

Post by Sandtrap » Wed Mar 28, 2018 4:14 pm

Vanguard Total Bond (VBTLX)
Vanguard Int-Term Tax Exempt (VWIUX)

j :D

nura
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Re: Anyone hold any defensive funds in their portfolio?

Post by nura » Wed Mar 28, 2018 4:27 pm

VMVFX Vanguard Global Minimum Volatility fund. Since inception the fund had less volatility than Wellington while beating VT on returns. Same ER than VWELX as well.

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

alex_686
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Re: Anyone hold any defensive funds in their portfolio?

Post by alex_686 » Wed Mar 28, 2018 4:36 pm

I hold a IShares low beta ETF, which I consider defensive. I would not consider a sector fund to be defensive. It is a rare stock that now fits nicely just into one sector catagory.

heyyou
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Re: Anyone hold any defensive funds in their portfolio?

Post by heyyou » Wed Mar 28, 2018 9:36 pm

I know now that I don't know, so I just ride the stock market's volatility, buffered by my bond fund allocation that also buffers my gains from the stock index funds. Saving more was my best way to portfolio growth.

I've seen enough crashes and eventual recoveries that I am somewhat calloused to their effects on portfolio value. In retirement, I can spend from my bond funds for a long time before I need to sell any stock fund shares at depressed prices, but I am slow to rebalance into those low priced stock funds. It is liberating to no longer be so greedy as when I was seeking more optimal returns.

Holding PCRIX for a decade cured me of believing hype about steady future performance regardless of market conditions. That is my problem with supposedly defensive funds, the markets seem to not ever follow the precise history that is needed for those funds to do better than just patient, long term holding of equities. Succinctly, there are no shortcuts on risk and reward.

NYCwriter
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Re: Anyone hold any defensive funds in their portfolio?

Post by NYCwriter » Wed Mar 28, 2018 9:56 pm

What's a "defensive" fund? On valuation? Consumer defensives? Even my bond funds are down right now, but they're at least safer. ;)

I was thinking about Vanguard's value factor fund. If you wanted to throw another etf into your portfolio, utilities as you mention will probably remain cheap or even get cheaper this year. I guess that's if you want to continue to allocate to equities and squeeze some income out of it.

protagonist
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Re: Anyone hold any defensive funds in their portfolio?

Post by protagonist » Wed Mar 28, 2018 10:00 pm

CD's, I-bonds, a small amount in intermediate corporate bond fund, and home equity. Not funds, but , I hope, protection against a market crash.
Home equity is a big one, because even if the housing market crashes with the stock market, I still have a roof over my head with minimal carrying costs.

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Re: Anyone hold any defensive funds in their portfolio?

Post by NYCwriter » Wed Mar 28, 2018 10:03 pm

nura wrote:
Wed Mar 28, 2018 4:27 pm
VMVFX Vanguard Global Minimum Volatility fund. Since inception the fund had less volatility than Wellington while beating VT on returns. Same ER than VWELX as well.
Is it the companies, the ex-US factor, or the currency hedging that makes the fund less volatile? I hold Wellington in my 457b. The whole point is to have a balanced fund I don't have to worry about. These seem like different types of funds.

KlangFool
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Re: Anyone hold any defensive funds in their portfolio?

Post by KlangFool » Wed Mar 28, 2018 10:05 pm

OP,

Vanguard Total Bond (VBTLX)
Vanguard Interm-Term Treasury Adm (VFIUX)
Wellington Fund (VWELX)
Cash
30 years fixed rate mortgage
Gold Jewelry

KlangFool

Theoretical
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Re: Anyone hold any defensive funds in their portfolio?

Post by Theoretical » Thu Mar 29, 2018 1:33 am

High quality intermediate muni bonds (BMBIX)
Brokered CDs
TIPS
Trend Following Managed Futures
Paid off home

B. Wellington
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Re: Anyone hold any defensive funds in their portfolio?

Post by B. Wellington » Thu Mar 29, 2018 7:59 am

Wellington
Wellesley Income
Short Term Treasuries

~4-5 years from "semi-retirement".

Note: Both W/W funds are down so far this year due to rising interest rates and a pull-back in equities. Defensive maybe, but no "safe" harbor.

hirlaw
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Re: Anyone hold any defensive funds in their portfolio?

Post by hirlaw » Thu Mar 29, 2018 8:05 am

Besides fixed income and CD's, I hold some Vanguard Global Minimum Volatility fund (VMVFX).

nura
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Re: Anyone hold any defensive funds in their portfolio?

Post by nura » Sat Mar 31, 2018 5:21 pm

NYCwriter wrote:
Wed Mar 28, 2018 10:03 pm
nura wrote:
Wed Mar 28, 2018 4:27 pm
VMVFX Vanguard Global Minimum Volatility fund. Since inception the fund had less volatility than Wellington while beating VT on returns. Same ER than VWELX as well.
Is it the companies, the ex-US factor, or the currency hedging that makes the fund less volatile? I hold Wellington in my 457b. The whole point is to have a balanced fund I don't have to worry about. These seem like different types of funds.
The fund picks low beta securities (typically 0.5) with low-correlation. It seems like a more tax-efficient approach than adding bonds to dampen volatility.

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cfs
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Re: Anyone hold any defensive funds in their portfolio?

Post by cfs » Sat Mar 31, 2018 5:27 pm

Not me. I like the aggressive growth and will not settle for a simple bunt, going for the grand slam. Good luck y gracias por leer / cfs

p.s. You just don't want to be out of this market for ONE day!
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fortyofforty
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Re: Anyone hold any defensive funds in their portfolio?

Post by fortyofforty » Sun Apr 01, 2018 8:46 am

cfs wrote:
Sat Mar 31, 2018 5:27 pm
Not me. I like the aggressive growth and will not settle for a simple bunt, going for the grand slam. Good luck y gracias por leer / cfs

p.s. You just don't want to be out of this market for ONE day!
But one day you will need to be out of this market, at least in part, most likely. Bon chance!
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

peppers
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Re: Anyone hold any defensive funds in their portfolio?

Post by peppers » Sun Apr 01, 2018 9:07 am

cfs wrote:
Sat Mar 31, 2018 5:27 pm
Not me. I like the aggressive growth and will not settle for a simple bunt, going for the grand slam. Good luck y gracias por leer / cfs

p.s. You just don't want to be out of this market for ONE day!
Well said

P.S. Nice segue into the start of the MLB season.
"..the cavalry ain't comin' kid, you're on your own..."

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cfs
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Re: Anyone hold any defensive funds in their portfolio?

Post by cfs » Sun Apr 01, 2018 9:10 am

peppers wrote:
Sun Apr 01, 2018 9:07 am
cfs wrote:
Sat Mar 31, 2018 5:27 pm
Not me. I like the aggressive growth and will not settle for a simple bunt, going for the grand slam. Good luck y gracias por leer / cfs

p.s. You just don't want to be out of this market for ONE day!
Well said

P.S. Nice segue into the start of the MLB season.
Oh yes, glad to see The Boys of Summer back in action! Good luck y gracias por leer / cfs
~ Member of the Active Retired Force since 2014 ~

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cfs
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Re: Anyone hold any defensive funds in their portfolio?

Post by cfs » Sun Apr 01, 2018 9:22 am

fortyofforty wrote:
Sun Apr 01, 2018 8:46 am
cfs wrote:
Sat Mar 31, 2018 5:27 pm
Not me. I like the aggressive growth and will not settle for a simple bunt, going for the grand slam. Good luck y gracias por leer / cfs

p.s. You just don't want to be out of this market for ONE day!
But one day you will need to be out of this market, at least in part, most likely. Bon chance!
The money the investor needs should not be IN the market. I choose to be 100 percent invested. My signare applies. Good luck y gracias por leer / cfs

p.s. You just don't want to be out of this market for ONE day!
~ Member of the Active Retired Force since 2014 ~

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fortyofforty
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Re: Anyone hold any defensive funds in their portfolio?

Post by fortyofforty » Sun Apr 01, 2018 9:57 am

cfs wrote:
Sun Apr 01, 2018 9:22 am
fortyofforty wrote:
Sun Apr 01, 2018 8:46 am
cfs wrote:
Sat Mar 31, 2018 5:27 pm
Not me. I like the aggressive growth and will not settle for a simple bunt, going for the grand slam. Good luck y gracias por leer / cfs

p.s. You just don't want to be out of this market for ONE day!
But one day you will need to be out of this market, at least in part, most likely. Bon chance!
The money the investor needs should not be IN the market. I choose to be 100 percent invested. My signare applies. Good luck y gracias por leer / cfs

p.s. You just don't want to be out of this market for ONE day!
The point of investing is to acquire spendable assets for future use. Eventually you reduce your exposure to the stock market. Everyone eventually gets out of the market, at least in part. Bon chance!
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

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cfs
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Re: Anyone hold any defensive funds in their portfolio?

Post by cfs » Sun Apr 01, 2018 11:59 am

Withdraw what you need and leave the rest invested, not to be confused with being OUT of the market.

And now we return to the normally scheduled program of "Anyone hold any defensive funds in their portfolio."

Gracias por leer / cfs

p.s. You just don't want to be out of this market for ONE day!
~ Member of the Active Retired Force since 2014 ~

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fortyofforty
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Re: Anyone hold any defensive funds in their portfolio?

Post by fortyofforty » Sun Apr 01, 2018 4:11 pm

Take your money out of the market when you need to spend it. That's being partly out of the market. Move your money out of the market into "defensive funds" such as short term bond funds as you get closer to your anticipated spend date. You might be wrong. You might be off by a year or two (or more), so you'll be in "defensive funds" at some point in your life. Absolutes are fine until you start to dig. Then reality slaps you in the face.

Now back to our show.

Merci, et bon chance!
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

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Re: Anyone hold any defensive funds in their portfolio?

Post by pkcrafter » Mon Apr 02, 2018 6:51 pm

ChinchillaWhiplash wrote:
Wed Mar 28, 2018 2:30 pm
Was looking at some defensive funds like VPU Vanguard Utilities ETF ER 0.10 or VDC Vanguard Consumer Staples ETF ER 0.10. Anyone hold any of these? Would think these could cushion the blow of large market downturn a bit. Thoughts? Any other funds in this category?
Well, Minimum Volatility, Dividend Appreciation, Equity Income offer somewhat lower downside risk, but as others have mentioned, risk and maximum portfolio drop are normally controlled with bond/non stock percentage.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Theoretical
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Re: Anyone hold any defensive funds in their portfolio?

Post by Theoretical » Mon Apr 02, 2018 9:18 pm

Also, everyone and their dog has been piling into them, so they're unusually expensive stocks right now. In general, don't expect stocks of any type to help you in a recession. They may offset some of the worst losses, but even the hallmark example small value still had a big decline in 2002.

Stocks are risky, in varying degrees.

james22
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Re: Anyone hold any defensive funds in their portfolio?

Post by james22 » Mon Apr 02, 2018 10:26 pm

Why settle for defensive when some few individual stocks (Berkshire, Fairfax, Oaktree, etc.) are anti-fragile?
This whole episode is likely to end so badly that future children will learn about it in school and shake their heads in wonder at the rank stupidity of it all... Hussman

Shikoku
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Re: Anyone hold any defensive funds in their portfolio?

Post by Shikoku » Mon Apr 02, 2018 11:09 pm

Yes, 33% of our portfolio is TIAA Traditional which is earning a guaranteed 3.22%.
"I don't worry too much about pointing fingers at the past. I operate on the theory that every saint has a past, every sinner has a future." -- Warren Buffett

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whodidntante
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Re: Anyone hold any defensive funds in their portfolio?

Post by whodidntante » Mon Apr 02, 2018 11:48 pm

AQR market neutral.

Sector funds and minimum volatility funds still have a heaping helping of beta. I don't think they are defensive.

snarlyjack
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Re: Anyone hold any defensive funds in their portfolio?

Post by snarlyjack » Wed Apr 04, 2018 6:03 am

Chinchilla,

I like your thinking...

I consider VHDYX & VDADX (High Dividend Yield Index Fund
& Dividend Appreciation Index Fund) as fairly conservative funds.
Because of the types of stocks/companies that they hold. But the funds are
still volatile, 100% stocks.

The good news is they are dividend paying funds. In a down
market by reinvesting the dividends you will be receiving more
& more shares.

The Consumer Staples & the Utilities sectors are my favorite sectors.
Long term 10, 20, 30 years from now (or longer) I' am very bullish
on these funds & these types of stocks/companies. I load up
on them... Good luck to you.

UpperNwGuy
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Re: Anyone hold any defensive funds in their portfolio?

Post by UpperNwGuy » Wed Apr 04, 2018 6:12 am

I am 60:40 stocks:bonds. I consider my two bond funds to be my defensive funds. The stocks are in two broad index funds with no tilting, slicing, or dicing. If I wanted stronger defense, I would change my allocation between stocks and bonds, not invest in specialized stock funds.

Broken Man 1999
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Re: Anyone hold any defensive funds in their portfolio?

Post by Broken Man 1999 » Wed Apr 04, 2018 8:14 am

Bonds and Federal money market for us.

Bonds
Vanguard Short term treasuries
Vanguard Intermediate term treasuries
Vanguard Total Bond Index
Series I & EE US Savings Bonds

AA
3.2% Federal Money Market. This fund holds two years estimated expenses.
Bonds 49.8%
Equities 47.0%

So, I don't have to sell bonds or equities for about two years.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

lazyday
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Re: Anyone hold any defensive funds in their portfolio?

Post by lazyday » Mon Apr 16, 2018 9:17 am

james22 wrote:
Mon Apr 02, 2018 10:26 pm
Why settle for defensive when some few individual stocks (Berkshire, Fairfax, Oaktree, etc.) are anti-fragile?
Does anyone else hold an opinion on whether those shares are antifragile?

In a crisis, Berkshire might get sweet deals, like the BoA preferred and warrants. And good capital allocators in general might pick up some cheap assets that aren't practical for an individual investor to buy.

So in a way, they can benefit from a crisis. Intrinsic value might be increased by these deals, though surely not enough to counter the damage suffered because of the crisis. The shares seem quite unlikely to act as a hedge, rising in price while others fall. Perhaps during the recovery, the shares might outperform because of deals made during the crisis. But enough to provide significant protection for the portfolio?

RamblinDoc
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Re: Anyone hold any defensive funds in their portfolio?

Post by RamblinDoc » Mon Apr 16, 2018 10:22 am

KlangFool wrote:
Wed Mar 28, 2018 10:05 pm
OP,

Vanguard Total Bond (VBTLX)
Vanguard Interm-Term Treasury Adm (VFIUX)
Wellington Fund (VWELX)
Cash
30 years fixed rate mortgage
Gold Jewelry

KlangFool

KlangFool,

What % of your portfolio is Wellington?

KlangFool
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Re: Anyone hold any defensive funds in their portfolio?

Post by KlangFool » Fri Apr 20, 2018 11:48 am

RamblinDoc wrote:
Mon Apr 16, 2018 10:22 am
KlangFool wrote:
Wed Mar 28, 2018 10:05 pm
OP,

Vanguard Total Bond (VBTLX)
Vanguard Interm-Term Treasury Adm (VFIUX)
Wellington Fund (VWELX)
Cash
30 years fixed rate mortgage
Gold Jewelry

KlangFool

KlangFool,

What % of your portfolio is Wellington?
RamblinDoc,

40%.

KlangFool

jalbert
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Re: Anyone hold any defensive funds in their portfolio?

Post by jalbert » Fri Apr 20, 2018 12:11 pm

ChinchillaWhiplash wrote:
Wed Mar 28, 2018 2:30 pm
Was looking at some defensive funds like VPU Vanguard Utilities ETF ER 0.10 or VDC Vanguard Consumer Staples ETF ER 0.10. Anyone hold any of these? Would think these could cushion the blow of large market downturn a bit. Thoughts? Any other funds in this category?
Utilities incorporate some interest rate term exposure. They have overperformed during a period of falling interest rates and might underperform if rates continue to rise. It is difficult to predict which sectors will overperform in the next downturn. Moreover, you would have to know when to get out of the sector to realize any benefit, the timing of which is also not easy to predict.
Risk is not a guarantor of return.

aristotelian
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Re: Anyone hold any defensive funds in their portfolio?

Post by aristotelian » Fri Apr 20, 2018 12:16 pm

I used to hold Consumer Staples but ditched it. The stock side is for taking risk. THere is no reason to hold anything other than total market. If the risk of total market is too much for you, you are far better off holding more bonds than you are concentrating in this or that sector.

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