Barron's wrote about Social Security again. There wasn't much that was new except quantifying how much money people would forgo if payouts actually get cut in 2032. As an example, my age 70 benefit added to my wife's age 64 benefit (our intention is to take it when I turn 70, she'd be 64) adds up to $6684 in today's dollars. A 23% reduction would be $1537/mo times 12 months times 25 years would be a lifetime hit of $461,196 in constant dollars.
The article took a stab at how to make that up by investing an extra lump sum amount now into Vanguard Balanced Index Fund. Using their math and thought process, I would need to invest $192,000 to have made up the $461,000 in 15 years. I realize there's a few more moving parts than that but it does give some context.
While Barron's mentioned VBAIX, Bloomberg says that Gen-Z investors are "ditching" bonds in favor of more cash and cash proxies. They are getting almost the same yield without the volatility or the interest rate risk. Amusingly, Bloomberg is citing work done by Vanguard for the ditching bonds comment.
I stumbled into a new fund to look at for anyone wanting to ditch their bonds. The Dynamic Alpha Macro Fund (DYMIX) allocates 50% to domestic equity ETFs and 50% to macro strategies. It seems similar to BLNDX or QNZIX which both split between equities and managed futures.
The results for DYMIX have been strong. It has compounded at 21% since its inception in 2023 but with a high degree of volatility.
The decline since February seems noteworthy but is probably easily dissected. The fund's literature refers to the fund has having very low turnover with the macro sleeve only having three holdings; gold, copper and five year treasury notes. It seems apparent that the majority of the macro sleeve is in gold and that the fund hasn't sold any of its position. Since gold rolled over, the decline in copper has been modest as has the decline for five year treasuries.
Morningstar says the turn over is 3% which means very little trading, very little. I don't really understand how a fund that never trades can be a macro fund as opposed to more of a multi-asset fund. The result can still be good, it is good irrespective of the current drawdown the fund is in.
The counterpoint to whether it might be better thought of as a multi-asset fund is there is very little under the hood of DYMIX that can go wrong. The literature mentions simplicity, the look through is easy and the only risk is the decisions made not some sort of complexity working against the NAV. The decisions have mostly been correct based on the result but for the last few months gold has hurt.
The backtest is interesting.
In terms of volatility, DYMIX is a bit of a hot potato but Portfolio 2 could be thought of as an example of how to incorporate a hot potato in with other holdings with different attributes to blend into a pretty smooth ride. I would not count on the growth rate to continue to be that strong but I think the volatility attributes could be pretty durable.
In terms of DYMIX, I think of macro strategies making a lot of small bets not one huge bet (gold in this case). I'm not going to be interested in pursuing the fund for clients but I think it could be useful for blogging purposes for studying ways to concentrate volatility into smaller slices of the portfolio like we did today.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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