Fund Filtering.

Our fund universe starts with our vendor-supplied data on mutual funds, closed end funds, and exchange traded funds and notes. These are then filtered down to funds with a positive return trend since inception (up to 10 years) and no data issues. Mutual funds are further limited to those with no front-end sales load, redemption/deferred loads of 2% for redemption within 90 days, 1% for redemption within 1 year, and 0.25% for unlimited redemption period. Funds are then classified by the volatility measures of standard deviation of weekly returns for four years, maximum drawdown for up to 10 years, and maximum drawdowns excluding well known crashes. The range of each volatility measure is then, divided into equal log increments, apart from a smaller low-volatility increment. Within each increment, only the top 3% or at least up to 5 are retianed, based on the average annualized return for 4, 2, and 1 years.

Cash-Like Funds.

In abnormal markets we typically go to cash-like funds that are immune from drawdowns. These can sometimes be found by looking at the low-volatility end of our Funds Table based on drawdowns including well known crashes. However, if interest rates are changing rapidly due to Fed tightening, they may be filtered out. We will then look to Morningstar in their Ultrashort Bond category.

Meltdown Signal.

Prior to 2024-04-13, the meltdown signal displayed on the top right corner of each page, was actually the status of the simulation, delayed one week. After that date, is purely the meltdown signal at the end of the week, where thumbs-up indicates less than 24% below the reference line, warning-triangle indicates more than 24% and less than 37% below the reference line, and thumbs-down indicates more than 37% below the reference line. Usually, a more specific interpretation of what to do about it will be present in Client Notes.