- Escalating trade war between the U.S. & China is generating significant market volatility
- Durig Capital explores where investors can turn in tumultuous markets
- Lifetime Return of 7.94%
Over the last few months, the ongoing trade-war between the U.S. and China has escalated into something of a volatility generating machine, with some market indices jumping up or down hundreds of points in a single day as new tariffs are added, sentiments of certain key political figures are expressed, etc. Causality aside, the markets are boiling and have many investors looking to find a way to beat the heat without having to leave the kitchen entirely. This week, Durig Capital explains how investors can do just that with its Dogs of the S&P 500 Portfolio.
An easy way to visualize market volatility is to take a look at the historical chart of a market index. As you can see below, the S&P 500 has been no stranger to volatility in the past year. Many believe that volatility only leads to weakened performance of investments (red points on graph below) but on the other hand, it is this same volatility that creates opportunities for heightened investment performance (blue arrows on graph below).
S&P 500 – 1 Year Chart
In reality, volatility is no more bad than it is good, but for most logical investors, the fear of significant loss is greater than the potential for significant gain, with many preferring not to expose themselves to the significant downward pressure that volatility can put on the markets.
Several reasons that have some investors moving away from index funds to other “safe haven” assets is a lack of both downside protection and control over holdings in periods of market turmoil.
Less Historical Volatility & Improved Downside Protection
In comparison, Durig’s Dogs of the S&P 500 Portfolio appears to contain much less historical volatility (see graph above). Note how the peaks and valleys are much shallower than those of the S&P 500’s. This is not only evidenced graphically, but has also been validated mathematically by benchmarking to the S&P 500 TR Idx below and observing the Beta that is produced (below).
Durig’s Dogs of the S&P 500 Portfolio has a Beta of 0.70, meaning if the S&P 500 moves up 10%, Durig’s Portfolio should theoretically move up 7%, with the inverse also holding. This lessened correlation to the market, which the S&P 500 is a proxy for, is what has allowed for the significant reduction of portfolio volatility and generally, more consistent historical performance of Durig’s Dogs of the S&P 500 Portfolio. Here are a few performance highlights:
- Year-to-Date Return of 12.63%
- Trailing 1 Year Return of 8.43%
- Lifetime Return of 7.94%
(above: Durigs Dogs of the S&P 500 Benchmark Performance, 8-13-19)
Avoid Making Brash Decisions
Dan Ariely, Chief Behavioral Economist at Qapital and a Professor of Behavioral Economics at Duke University, had this to say on market volatility in an interview with CNBC Finance:
“If we’re going to look at it going up and down, we’re just going to be more miserable,” “We’re not only going to be more miserable, but act on it…Those moves often include fleeing from stocks to bonds or cash — investments with a higher expected value for those with a lower expected value. Historically, those are some of the biggest mistakes that people can make.”
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For investors that are not too keen on weathering significant or prolonged bouts of downward market pressure, Durig’s Dogs of the S&P 500 Portfolio may represent a solution, featuring strong historical returns, blue-chip peace of mind, growth of income over time with less historical volatility than stocks and professional management, all at a very low cost.
Durig Capital has several high yield portfolios available, click below to learn more.
Disclaimer: Past performance is no indication of future success. Any market data or performance shown is this publication is as of 8-13-19. * The Primary Benchmark used is S&P 500 TR Idx. The high yield strategies presented in this review by Durig Capital may not be suitable for all investors. This is not investment advice from Durig Capital, nor a specific recommendation to buy or sell securities. If you have any questions or concerns about its suitability for your personal investment, you should seek specific investment advice from a registered professional before making an investment decision.