The market sell-off doesn’t seem to be abating as U.S. stock index futures continue to go down. In early trading on Thursday, May 19, contracts linked to the Dow and S&P 500 are down 1%, while the Nasdaq contract is down 1.3%.
The S&P 500 is on the brink of a bear market, down 18% from November 2021 all-time highs, further exacerbating worries.
Taking these elements into consideration, Finbold has researched two alternative funds, which could help in these turbulent markets.
Cambria Global Momentum (AMEX: GMOM)
GMOM is a tactical-allocation exchange-traded fund (ETF) whose goal is to shift around asset classes it holds in its portfolio depending on their performance in the past. In general, the goal of such funds is to pivot away from stocks when they become too volatile.
GMOM tracks 50 ETFs across stocks, bonds, real estate, commodities, and currencies and invests actively in one-third of those with the best momentum. The fund is up 5.7% for the year, while most others are down.
More recently, higher sell volumes have been noted, and some momentum was taken out of the shares. Yet, the shares trade in a wide uptrend, and despite being below all daily Simple Moving Averages, resistance to the downtrend hasn’t been broken yet.
iMGP DBi Managed Futures Strategy ETF (NYSEARCA: DBMF)
This mouthful of a fund is a managed-futures ETF that uses futures contracts to play trends across various asset classes. What makes it attractive, but also risky, is the fact that the fund holds short positions, which can bring benefits during choppy markets. Yet, it can cause a lot of pain, as has been witnessed in the Reddit short bashing frenzy in the previous year.
DBMF tries to match the performance of the 20 leading managed-futures hedge funds by basically copying their exposure. The benefit of such an approach for an individual investor could be that they get exposure to hedge fund-like performance on possibly lower fees.
The fund is up 25% year-to-date (YTD), with high volumes seen in May. The price has started its momentum swing at the start of the year and looks like it won’t let up any time soon with the recent market volatility.
Diversification and unconventional investments can prove to be the saving grace for investors during tough market conditions. The two above funds have a solid track record behind them in 2022, while major indexes are in correction territory or hovering near it.
Whether these funds outperform will depend on volatility, if it continues, these results might continue; if not, some drop-off in gains could be seen.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.