A Mutual Fund That Tracks Trends Via ETFs

Hat tip goes to a couple of readers for pointing to a mutual fund that actually tracks trends (by investing in ETFs) and moves to cash when a bear market strikes or during times of uncertainty.

The fund is Stadion Managed Portfolio (ETFFX). To get a better idea of its price movements, let’s first look at a 2-year chart:

It’s interesting to note the flat horizontal periods where this fund obviously has taken a defensive position during which the NAV remained steady. ETFFX has been on the market since Sept. 2007. While this represents only a short period of time, it nevertheless includes one of the worst market crashes in history (2008).

Let’s see how ETFFX has fared in comparison to the S&P; 500:

A picture is worth a thousand words, and this one is no different. While any investment approach suffered some losses in 2008, ETFFX managed to keep those to a minimum.

This also supports my view that #1 it’s far more important to avoid the big losses than to participate in every uptrend and #2, as I posted in “Buy And Hold Revisited,” missing the next major rebound (from March 9, 2009) is unimportant (after having moved to the sidelines) as it only serves the purpose (so far) of making up heavy losses.

In its fairly short life, ETFFX has performed well. So what’s wrong with it?

The only thing I found is that it is a load fund with an upfront charge of 5.75%, which is not acceptable to me. However, at my custodian (Schwab), anyone can purchase it as a “load waived fund.”

If this fund is of interest to you, you might want to check with your custodian to see if it can be bought there as well without any fees.

Disclosure: No current positions in ETFFX

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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