Rationale for Managed Futures: I think they pair better with momentum factor equities than static bond allocations.
Managed futures is basically a momentum strategy, so I am not sure I understand your rationale. MF has a tendency to get whipsawed at the beginning and end of bear markets, which I believe happens with the momentum factor as well. An instrument like DBMF trades equity futures, which may be less diversifying than KMLM in the context of your portfolio. I have invested in mf for years, but they do not provide a consistent source of real return which bonds do; they provide real return but it is very inconsistent.
The primary driver of return is the SP 500. This is why it went down during the last bear market; so in most bear markets you should expect it to lose money. In a bull market it will give you bond like return. In a fast crash it will do very well, but then may give those returns back quickly.Rational for CAOS ETF: I think it serves a similar role to VGLT but without directly relying on the US government and with the added benefit of spiking during most volatility events.
Historical performance: https://testfol.io/?s=8jn6CFcCCbc
VGLT at least provides real return and deflation protection (although is not my first choice in bonds). Also no reason to think that it will go down in the next equity bear market. It might or might not.
Not really clear why you prefer this to commodities or bitcoin. If you have an allocation in it already, fine. If not, then you are performance chasing.I prefer it to a cash or T-Bills reserve, especially because it tends to gain during periods of uncertainty. I expect real returns from it to be zero, which is fine; it's my version of dry powder.
You are replacing an asset (bonds or cash) that have a real return >0% with one that has a lower return. Your already have enough uncertainty insurance, you need more diverse sources of return.
1. it is quite likely that during the next bear market in stocks there will be a bull market in bonds. In this scenario. your portfolio will probably do worse because of the allocation to Gold and CAOS.
My expectations:
1. The test portfolio will continue to have volatility and drawdowns comparable to, or slightly better than, VBIAX.
2. The test portfolio may underperform VBIAX during extended bull runs for stocks and bonds, but it will prove more robust against downturns and excel in directional markets, which will ultimately result in it outperforming VBIAX by about 2% annually.
2. If bond returns are close to stock returns over the next 5 years (which I think is possible if not the most likely scenario), I think it is likely you give up 4% annualized to VBIAX because the carry cost of momentum and volume strategies is about -2% in those scenarios and bonds will likely give you at 5% returns over that period.
Given my answer to #1, I think you should be benchmarking against a higher equity portfolio anyway to better match the drawdowns. So I agree high returns on average but also higher risk.
Statistics: Posted by will23 — Thu Dec 04, 2025 2:58 am — Replies 31 — Views 2439