Considering alternatives in a fast-changing market

 

Thinking about investing beyond traditional stocks and bonds?

Learn more about alternative investments.

Investors looking for non-mainstream opportunities may opt for alternative funds for a small portion of their overall portfolios. These funds tend to have a low correlation to traditional investments, such as stocks and bonds, which means they do not move in unison with the broader markets. This makes them a potential choice for investors who are seeking to add diversification and growth potential, in the alternative space to a well-balanced portfolio. Alternative funds also have numerous risks beyond traditional investments and  may take short positions or invest in currencies, tangible assets, real estate, derivatives, commodities, and more.
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Bear market funds

These funds dedicate most of their portfolios to short stock positions in an attempt to benefit from anticipated market declines. Some managers invest the proceeds from their short positions in low-risk assets, while others dedicate a portion to long stock positions in order to hedge against broad market rallies. In the event of a rally, these funds will lose money on their short positions but will experience a gain on their long positions. Investors should also note that while bear funds may help to hedge against short-term declines, over the longer term they have performed poorly because of the general upward trend of the market.
 

Mutual Funds

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Long-short equity funds

As the name implies, long-short funds hold both long and short positions in equities and related derivatives. Some funds that fall into this category actively tilt their portfolios in one direction or the other based on their economic outlook or opportunities they uncover through their proprietary research. During significant market declines, fund managers may have a difficult time shorting certain stocks due to regulatory limits and market conditions.
 

Mutual Funds

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Managed futures funds

These funds primarily trade liquid global futures, options, swaps, and foreign exchange contracts, both listed and over-the-counter. A majority of these funds employ trend-following, price-momentum strategies. Other strategies included in this category are systematic mean-reversion, discretionary global macro strategies, commodity index tracking, and other futures strategies. Managed futures also carry unique risks, for example, commodities markets can be more volatile than traditional securities.
 

Mutual Funds

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Market neutral funds

These funds attempt to reduce systematic risk created by factors such as exposure to particular sectors, market-cap ranges, investment styles, currencies, or countries. They try to achieve this by matching short positions within each area to long positions. These strategies are often managed as beta-neutral, dollar-neutral, or sector-neutral. However, market-neutral funds tend to have high portfolio turnover, which can result in higher costs,
 

Mutual Funds

Fund Name / Symbol
Overall Morningstar
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Total Net
Assets
Yield
Net Expense
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ETFs

Data as of ET
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Multialternative funds

These funds offer investors exposure to multiple different alternative investment tactics. Funds in this category include both funds with static allocations to alternative strategies and funds tactically allocating among alternative strategies and asset classes in response to anticipated market movements. At the same time, using multiple strategies might lead to a flattening of return and potentially less transparency.
 

Mutual Funds

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Net Expense
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ETFs

Data as of ET
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Multicurrency funds

Multicurrency funds seek to profit by investing in an array of global currencies through the use of short-term money market instruments, cash deposits, and derivatives, such as forward currency contracts, index swaps, and options. Among the risk of currency funds: Currency exchange rates may fluctuate significantly over short period of time due to unpredictable events such as political developments.
 

Mutual Funds

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ETFs

Data as of ET
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Non-traditional bond funds

This category includes funds that pursue strategies different than most traditional bond funds. Many funds in this group describe themselves as “absolute return” portfolios, which seek to avoid losses and produce returns uncorrelated with the overall bond market. Another large subset are “unconstrained” portfolios that have more flexibility to invest tactically across a wide range of sectors, including high-yield and foreign debt. This category is also home to portfolios that attempt to minimize volatility by maintaining short or ultra-short duration portfolios, but explicitly court significant credit and foreign bond market risk in order to generate high returns. A word of caution, though. Some of these funds may take on additional risks—such as investing in low-quality bonds—to compensate for their reduced interest rate risk.
 

Mutual Funds

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Data as of ET
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Single currency funds

Single currency portfolios seek to profit by investing in a single currency through the use of short-term money market instruments, cash deposits, and derivatives, such as forward currency contracts, index swaps, and options.
 

Mutual Funds

Fund Name / Symbol
Overall Morningstar
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ETFs

Data as of ET
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Fund selection criteria: The funds displayed are not a recommendation by E*TRADE Securities or its affiliates to buy, sell or hold any security, financial product or instrument  nor is it an endorsement of any specific security, company, fund family, product or service. All screens display funds within the respective category and group. Alternative investment strategies are not for everyone and entail risks that are different from more traditional investments. Alternative investments are intended for sophisticated investors and involve a high degree of risk, including the potential for loss of some or all principal. An investment in an alternative investment product or strategy is speculative and should not constitute a complete investment program.  For additional information, please read the guidelines provided by FINRA at http://www.finra.org/Newsroom/NewsReleases/2013/P278031

All mutual fund screens exclude funds not open to new investors, exclude funds that have expense ratios greater than 2% and only include NLNTF mutual funds with initial investment minimums of $5,000 or less. All ETF screens exclude exchange traded notes and leveraged ETFs. The top performing funds, based on 3 Year total return, within the various category screens are shown in the initial display along with the all the NLNTF All-Star funds of the corresponding category. All funds in the initial display are ranked by 3 Year total return.

All funds within the respective group can be seen by clicking on the hyperlinked / button section in the phrase "X of X results," "See more Mutual Funds," or "See more ETFs."

Investing in Commodities, REITS, Bonds, and International or Global investments carries certain risks such as price volatility, currency risk, market risk, interest rate risk and credit risk. An investor should fully understand these risks before making an investment.

International investing carries certain risks that can be different from the risks of U.S. investments. These risks can include political or economical instability, changing currency rates, foreign taxes, reduced liquidity (difficulty selling securities held by a fund) and different regulatory or financial accounting standards.

You can invest in the mutual funds available through E*TRADE Securities' no-load, no-transaction-fee program without paying loads, transaction fees, or commissions. To discourage short-term trading, E*TRADE Securities will charge an Early Redemption Fee of $49.99 on redemptions or exchanges of no-load, no-transaction-fee funds that are held for less than 90 days. Direxion funds (other than the Indexed Commodity Strategy Fund DXCTX), ProFunds, Rydex mutual funds, and all money market funds are not subject to the Early Redemption Fee. All fees and expenses as described in the fund's prospectus still apply. Please read the fund's prospectus carefully before investing.

You can buy and sell the exchange-traded funds (ETFs) available through the E*TRADE Securities commission-free (CF) ETF program without paying brokerage commissions. For margin customers, the ETFs purchased through the program are not margin eligible for 30 days from the purchase date. To discourage short-term trading, E*TRADE Securities may charge a short-term trading fee on sales of participating ETFs held less than 30 days.

The overall Morningstar Rating™ for a fund is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar risk-adjusted return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive five stars, the next 22.5% receive four stars, the next 35% receive three stars, the next 22.5% receive two stars, and the bottom 10% receive one star. (Each share class is counted as a fraction of one fund within this scale and is rated separately, which may cause slight variations in the distribution percentages.) 

The All-Star List is a quarterly list of leading funds and ETFs selected by E*TRADE Capital Management, LLC. Funds selected for the All-Star List are selected from the no-load mutual funds offered through E*TRADE Securities.

All-Star Funds typically have at least a three year track record and compare favorably against their peers based on historical return, risk, expenses, manager tenure, performance and style consistency, asset size and growth and must be 1) structured through sound investment philosophy and process, 2) implemented with acceptable level of investment risk management strategy and 3) supported by a reputable investment firm. To view the fund's Report Card with additional performance metrics, including standardized quarterly results, please click on the fund name.

Expense ratios are provided by Morningstar and are based on information obtained from the ETFs last audited financial statement. Current expense ratios for the ETFs may be different.

Yield is a measure of the fund's income distributions, as a percentage of the fund price. Morningstar calculates this figure by summing the income distributions over the trailing 12 months and dividing that by the sum of the last month's ending NAV plus any capital gains distributed over the 12-month period.

For a definition of terms, please click on the Data Definitions link. Data definitions provided by Morningstar.

Quotes may be delayed by at least 15 minutes. Quotes and other information supplied by independent providers identified on the E*TRADE vendor disclosures page

Data provided by Morningstar, Inc.

Consider the Alternatives

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