Investing Insights
Worried About a Market Sell-Off? These 10 Funds Reduce Portfolio Risk
Mar 14, 2025
Russ Kinnel, a senior principal of ratings at Morningstar Research Services, shares his expertise on fund analysis and portfolio diversification. He discusses the importance of the downside capture ratio for mitigating risks during market sell-offs. Kinnel highlights safe investment options, such as low-risk funds and bank loan funds to combat interest-rate fluctuations. He also explores unique strategies like arbitrage and emphasizes the significance of diversification, especially for risk-averse investors.
12:00
Episode guests
AI Summary
AI Chapters
Episode notes
Podcast summary created with Snipd AI
Quick takeaways
- Understanding the downside capture ratio is crucial for identifying funds that historically protect investments during market downturns.
- Risk-averse investors should incorporate low-risk options like bank loan funds and defensive large-value funds to safeguard their portfolios.
Deep dives
Understanding Downside Capture Ratio
The downside capture ratio is an important metric that indicates how much a fund mirrors the market's losses. For example, if the market drops by 20% and the fund also loses 20%, it has a downside capture ratio of 100%, meaning it experiences the same level of decline as the overall market. A fund with a low downside capture ratio may serve as a good diversifier, as it historically has lost less during market downturns. However, a low downside capture does not necessarily equate to low risk, highlighting the need for investors to assess risk profiles alongside this metric.
Remember Everything You Learn from Podcasts
Save insights instantly, chat with episodes, and build lasting knowledge - all powered by AI.
