CHICAGO (Reuters) – For angst-addled market watchers, the U.S. debt ceiling and budget chaos has been like one of those amusement-park rides in which you ride upside down. It’s harrowing and probably not over yet.
In addition to market and credit risk in the stock and bond markets, you need to be acutely aware of political risk. That means finding pockets of profit that are not dependent upon Washington.
Here are three strategies:
1. Balance risk in one fund
If you’re a fairly moderate to conservative investor, having a balanced fund as a core holding could replace several funds that hold just stocks or bonds. While you’re not entirely insulated from political risk, it’s more of a hedge than being completely exposed to stocks or bonds. But can you get one mutual fund to do this for you in a tactical way?
The Oakmark Equity and Income Fund is an actively managed fund that shifts between stocks, bonds and cash. But the Oakmark fund is not your typical 60-percent stocks, 40-percent bond mix. The fund can invest up to 35 percent of its assets in non-U.S. securities, which it has done with stakes in Nestle S.A. ADR and Diageo PLC ADR.
Unlike most balanced funds, it has nearly three-quarters of its assets in stocks, with about a quarter in bonds and cash. It’s done well to date; it’s up 18 percent for the year through October 18, compared with 12 percent for a Morningstar moderate-risk index. The fund charges 0.78 percent annually for expenses.