It is an inescapable fact that we all hate to experience pain and that includes pain from investments losses. Anytime there is a significant selloff in markets, as we are experiencing now, a little voice in our heads starts to whisper “Get out! Get out!” Frequently we encounter various friends who tell us they got out “the day before the crash” or something to that effect. How could we be so stupid?
I like to look at track records of tactical investing rather than anecdotes. When you look at track records, getting in and out of the market just doesn’t work out for many investors. In fact, Morningstar (an investment research service) recently noted that out of 22 mutual funds taking a tactical approach ten years ago, 17 of those funds have either shut down or merged into other funds.
Hussman Strategic Total Return is a fund that has been around for a while. So how well does such a tactical approach work for accumulation and distribution?
Accumulation: Almost 20 years of $500 monthly
Hussman Strategic Total Return has a long history, but falls just short of giving us 20 years. Nevertheless, this is one of the older funds in this class, so we’ll just remember that we are a couple of months short of 20 years.
10/1/2002 - 5/31/2022
$219,450 Balance after 19 years and 8 months
$417,318 Vanguard S&P 500 Index during the same period
Hussman did get ahead briefly during the 2008 crisis, but has dramatically lagged since 2012.
For those willing to just keep at it, the higher-risk exposure to equity paid off by nearly 2x.
Distribution Phase: 5% distributions annually over the same time period
Here we shift to the distribution phase. Now admittedly, this is a very favorable starting point for a retiree because most of the damage from the Dot-com selloff was done by the time the Hussman Fund was born. But we did have to go through the 2008 crisis, Covid-19, and now the inflation-related selloff that we are currently experiencing.
Ending balance:
$69,952 Hussman Strategic Total Return survives 20 years, but will likely run out before 30.
$342, 016 Vanguard S&P 500 Fund comes out looking super. Again, this is greatly impacted by the starting point of October 2002. However, as a retiree, doesn’t it show us that when things are dark, we should still be thinking like buyers rather than sellers even in the retirement phase?
Retirees felt the impact of the 2008 selloff, but for those who simply stayed invested, they far outperformed any tactical approaches.