uploads///chart

How Investing in GATEX Could Impact Your Portfolio

By

Nov. 20 2020, Updated 1:29 p.m. ET

Alternative fund’s benefits

Different alternative funds perform different investment goal-related functions. Some alternative funds can be used to reduce the overall volatility of a portfolio. Other alternative funds can boost a portfolio’s total return after tax. The Gateway Fund – Class A (GATEX) is an alternative mutual fund that could increase the exposure of an investor’s portfolio in the equity market. It has less volatility risk compared to equity markets. GATEX’s top holdings include stocks like Amazon (AMZN), JPMorgan Chase (JPM), Johnson & Johnson (JNJ), and Alphabet (GOOG). GATEX’s benchmark index is the S&P 500 Index (VFINX).

The above chart compares the return performance of a mixed portfolio consisting of 30% GATEX and 70% S&P 500 holdings with the return performance of the S&P 500 itself during a span of three years.

Article continues below advertisement

Reduced volatility, reduced returns

The S&P 500 Index performed better than GATEX. The three-year annualized return of the S&P 500 Index as of January 4, 2016, is 13.9%. GATEX’s return is 4.3%. However, GATEX isn’t as volatile as the S&P 500 Index. As a result, including GATEX in a portfolio could reduce the overall volatility risk. This would reduce the portfolio’s downside risk. Investing in GATEX resulted in a mixed portfolio. It gave reduced returns of 11%.

Conclusion

GATEX is an alternative mutual fund that uses a popular hedge fund strategy to achieve its investment objective of outperforming the S&P Index. It could reduce a portfolio’s volatility risk. The fund uses the market neutral hedge fund strategy to reduce the risk. It maintains a portfolio of common stocks mixed with short calls and long put index options. A mutual fund also provides exposure to the precious metals sector. An example of such a fund is the First Eagle Gold Fund – Class ­A (SGGDX). To learn more about SGGDX, read SGGDX: A Structural Analysis of the Alternative Mutual Fund.

Advertisement

More From Market Realist

  • Berkshire Hathaway chairman Warren Buffett
    Fund Managers
    Berkshire Hathaway 13F: Stocks Warren Buffett Is Buying in 2021
  • Man holding a laptop
    Fund Managers
    Are Cybersecurity ETFs Worth Your Money?
  • ARK Invest CEO Cathie Wood
    Fund Managers
    Avoid ARK Innovation ETF (ARKK), Might Not Recover Soon
  • Equinox gym
    Fund Managers
    Should You Buy Palihapitiya’s IPOF Stock on Equinox Merger News?
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.