Morningstar tells us that efforts at taming volatility in a multi-asset class framework generally turns up mixed results among publicly traded funds. Studying 60 products that are labeled “multiasset volatility-protection funds,” a recent Morningstar article reports that “as a group, volatility-protection funds do generally offer refuge when equity markets turn negative.” But it’s debatable if the extra cost and complexity that tends to define this group is worthwhile. As Morningstar notes, a simple blended index of 40% equities/60% bonds, which can be created with low-cost index funds, delivered superior downside risk management during periods when the S&P 500 fell.
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