Diversifier strategies seek to strengthen portfolios by functioning as a separate asset class, distinct from stocks and bonds. They target differentiated risk-reward profiles, attempting to support portfolios when traditional assets are stressed. Because of their unique role, diversifiers do not always perform in lock step with other investments.
Source: Morningstar. Displayed above are the standard deviation and return of different asset classes using the S&P 500 Total Return Index to represent “Stocks”, Morningstar US Fund High Yield Bond Category to represent “High Yield Bonds”, Morningstar US Fund Intermediate Government to represent “Treasuries,” and the Bloomberg Barclays US Aggregate Bond Index. Source: Kenneth French Data Library. The 3 Factor Market Neutral Strategy delivers the risk-free rate plus the simple average of returns to value, profitability, and momentum portfolios. Each factor portfolio is long the ⅓ of all stocks with the greatest factor exposure and short the ⅓ of stocks with the lowest factor exposure. The model multifactor portfolio is neither optimized for risk-adjusted returns nor does it improve stock selection with an aggregate model. Multifactor portfolio returns include the long-run risk free rate and do not factor in transaction costs, variables that would drag on returns. The High Yield Strategy is defined by buying the Morningstar High Yield Category when it closes above its 200-day moving average the prior day. The strategy entirely switches to exposure of the Bloomberg U.S. Treasury 3-5 Year Total Return Index when the Morningstar High Yield Category closes below its 200-day moving average.
There is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses. The indices shown are for informational purposes only and are not reflective of any investment. As it is not possible to invest in the indices, the data shown does not reflect or compare features of an actual investment, such as its objectives, costs and expenses, liquidity, safety, guarantees or insurance, fluctuation of principal or return, or tax features. Past performance is no guarantee of future results.
Source: Morningstar. Displayed above are the max drawdown and return of different asset classes using the S&P 500 Total Return Index to represent “Stocks”, Morningstar US Fund High Yield Bond Category to represent “High Yield Bonds”, Morningstar US Fund Intermediate Government to represent “Treasuries,” and the Bloomberg Barclays US Aggregate Bond Index. Source: Kenneth French Data Library. The 3 Factor Market Neutral Strategy delivers the risk-free rate plus the simple average of returns to value, profitability, and momentum portfolios. Each factor portfolio is long the ⅓ of all stocks with the greatest factor exposure and short the ⅓ of stocks with the lowest factor exposure. The model multifactor portfolio is neither optimized for risk-adjusted returns nor does it improve stock selection with an aggregate model. Multifactor portfolio returns include the long-run risk free rate and do not factor in transaction costs, variables that would drag on returns. The High Yield Strategy is defined by buying the Morningstar High Yield Category when it closes above its 200-day moving average the prior day. The strategy entirely switches to exposure of the Bloomberg U.S. Treasury 3-5 Year Total Return Index when the Morningstar High Yield Category closes below its 200-day moving average.
There is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses. The indices shown are for informational purposes only and are not reflective of any investment. As it is not possible to invest in the indices, the data shown does not reflect or compare features of an actual investment, such as its objectives, costs and expenses, liquidity, safety, guarantees or insurance, fluctuation of principal or return, or tax features. Past performance is no guarantee of future results.
No strategy works all the time, and prudent risk management often means not every investment should be moving in the same direction at the same time. A blend of alternatives with stocks and bonds can potentially extend the risk-management benefits associated with traditional asset class diversification. Over the long run, diversifier strategies have tended to provide investors with reasonable returns as well as attractive risk-management benefits, making them suitable for many types of portfolios.
Inflation puts investment grade bond portfolios at risk, especially when interest rates are already low. Tactical trend following in high yield credit has potential to capitalize on high yield’s historical resilience in rising rate environments, while managing the downside associated with added credit risk.
As of March 11, 2026, year-to-date factor performance has been characterized by strong momentum leadership, improving quality exposure in developed markets, and persistent underperformance of
At Counterpoint, we’ve been championing diversifier strategies for a while now—like the wise old friend who keeps reminding you to bring an umbrella just in
Year-ahead commentary is challenging for us: We don’t have a crystal ball, and we believe predictions contribute more to investment mistakes than outperformance. But the
In simple univariate tests, the disposition effect for a stock nearly disappears if the portfolio is at a gain. We find a large disposition effect when the portfolio is at a loss. The portfolio-driven disposition effect that we document is not explained by extreme returns, portfolio rebalancing, simultaneous transactions, or
Investments cannot be made in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Past performance is no guarantee of future results.
© 2024 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
5516-NLD-09/01/2021
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