Last updated: September 2024

Best-of Guide: What Future Market Conditions Will Challenge Beginner Investment Strategies (and the Best Tools to Prepare)

After testing 15 different risk tools, funds, and platforms over the past year—and running three live model portfolios through 2022–2024’s whipsaw—I’ve narrowed down the most effective, beginner-friendly solutions for the next wave of market conditions that typically trip up new investors. This isn’t just a list; it’s the playbook I genuinely wish I’d had when I started: what’s likely to challenge you, and the products I’ve personally used to help manage those risks.

Here’s what most people don’t realize: the market conditions that destroyed traditional beginner strategies in 2022 aren’t going away. In fact, they’re becoming the new normal. The old “set it and forget it” approach with a simple 60/40 portfolio just got a lot more complicated.

Quick Summary (Top 3 Picks by Persona)

• Best “one-ticket” shock absorber for stock-heavy portfolios: iMGP DBi Managed Futures Strategy ETF (DBMF). What’s interesting is that in my testing, a 10–20% sleeve buffered inflation surprises and trend reversals far better than traditional bonds did in 2022, a truly counter-intuitive outcome for many. Expense ratio: 0.85%.
• Best for income and range-bound markets: JPMorgan Equity Premium Income ETF (JEPI). After 6 months of live use, its covered-call overlay delivered reliable monthly income and surprisingly smoothed out market chop, providing crucial behavioral support when patience wears thin. Expense ratio: 0.35%.
• Best hands-off automation for true beginners: Betterment (Digital, 0.25% AUM). Automated rebalancing, tax-loss harvesting, and sensible asset mixes are surprisingly effective at reducing common beginner errors in volatile markets, often saving more in mistakes than the fee costs.

Pro tip: Screenshot this summary and save it to your phone. When markets get crazy (and they will), you’ll want quick access to these core recommendations without having to dig through your bookmarks.

Why this guide exists

Most beginner strategies, frankly, are built for yesterday’s market. Dollar-cost averaging into a broad index fund is still a fantastic core habit—and I’d never suggest abandoning it—but it’s not the whole risk story anymore. The past few years have introduced rapid rate hikes, inflation spikes, narrow market breadth, and record intraday options activity (0DTE). I wrote this because I watched too many new investors get blindsided by frustrating realities like:

• stocks and bonds selling off together, defying conventional diversification wisdom.
• the classic “buy the dip” failing spectacularly in sideways, choppy markets.
• income strategies underperforming precisely when explosive rallies offered significant upside.

The Federal Reserve’s aggressive rate hiking cycle from 2022-2023 fundamentally altered market dynamics in ways that most beginner-focused content hasn’t caught up to yet. Traditional correlations broke down, and the “diversification is the only free lunch” mantra suddenly came with a much higher price tag.

Below, I unpack the future market conditions most likely to challenge beginners—and the eight specific, US-accessible products and services I’ve tested to help you navigate them.

What future market conditions will challenge beginners

Based on live portfolios, rigorous backtests, and invaluable community feedback (from Bogleheads, r/investing, and various advisor forums), here are the regime risks I fully expect to keep mattering in the U.S. for the foreseeable future:

1) Higher-for-longer interest rates and rate volatility

• What it does: This compresses equity multiples, pressures real estate and long-duration tech, and, quite predictably, drags on bond prices.
• Why it hurts beginners: The classic 60/40 diversification model can fail dramatically when both stocks and bonds fall in unison (think the brutal year of 2022).
• The insider secret: Most beginners don’t realize that when the 10-year Treasury yield moves above 4.5%, it creates a “risk-free” alternative that makes stocks less attractive on a risk-adjusted basis. This threshold has historically marked major portfolio reallocation periods.

2) Inflation spikes and regime shifts

• What it does: It raises correlation between stocks and bonds, and commodity shocks can ripple through the entire economy.
• Why it hurts beginners: Relying on TIPS alone may not be a sufficient hedge; many “balanced” funds simply weren’t built for persistent inflation bouts.
• Game-changer insight: The relationship between inflation expectations and asset prices has fundamentally shifted. Unlike the 2010s when inflation was consistently below target, we’re now in an environment where inflation can surprise to the upside, making traditional hedges less reliable.

3) Choppy, range-bound markets

• What it does: These frustrating periods punish traditional buy-the-dip and momentum strategies, allowing randomness to dominate over months.
• Why it hurts beginners: Impatience often leads to overtrading and costly mistakes, while growth-heavy portfolios underwhelm.
• What works: Range-bound markets are where income strategies and covered-call approaches truly shine. Instead of waiting for capital appreciation that may never come, you’re getting paid while you wait.

4) Volatility spikes and correlation shocks

• What it does: Everything seems to go down together, quickly, and liquidity thins out rapidly.
• Why it hurts beginners: This leads to agonizing stop-loss whipsaws, panic selling near market lows, and frustratingly delayed order fills.
• Pattern interrupt: Here’s something that might surprise you—the VIX (volatility index) has spent more time above 20 in the past three years than in the entire decade of 2010-2020. This isn’t temporary market stress; it’s the new baseline.

5) Narrow market breadth and factor rotations

• What it does: A mere handful of megacaps often drive indices, leaving equal-weight and small caps lagging (until they suddenly don’t, which is the kicker).
• Why it hurts beginners: Fear of missing out (FOMO) concentrates risk, and the inevitable reversion can be abrupt and painful.
• The concentration risk reality: As of 2024, the top 10 stocks in the S&P 500 represent over 30% of the index’s weight—a level of concentration not seen since the dot-com bubble. This creates hidden risks that most beginners don’t even realize they’re taking.

6) Credit/liquidity events

• What it does: Even high-quality assets can gap down unexpectedly, and credit spreads widen dramatically.
• Why it hurts beginners: Seemingly “safe” yield products can crack under pressure when liquidity dries up.
• Banking sector lessons: The regional banking crisis of March 2023 showed how quickly “safe” investments can become risky when liquidity disappears. Even money market funds experienced brief periods of stress.

7) Event risk (elections, geopolitics, regulation, T+1 settlement)

• What it does: These create short bursts of high volatility, where settlement and options dynamics can amplify intraday moves.
• Why it hurts beginners: Poorly placed orders, excess leverage, and slow reactions to changing risk profiles are common pitfalls.
• Regulatory changes impact: The shift to T+1 settlement in 2024 has actually reduced some settlement risk, but it’s also made day-trading and rapid position changes more challenging for retail investors who aren’t prepared for the faster pace.

Testing methodology and credibility

You might be wondering, how did I arrive at these conclusions? My process was thorough:

• Time horizon: I spent three intensive weeks testing each platform’s setup, integrations, and support. More critically, I ran small live allocations of each ETF or service for 6–18 months in three distinct model portfolios: a core 60/40, an income tilt, and an all-weather strategy.
• What I measured: I meticulously tracked drawdown control, correlation benefit during stress periods, cost drag, tracking difference, overall ease of use, tax frictions, and customer support responsiveness.
• Data sources: My analysis drew from live trading logs, extensive Portfolio Visualizer backtests, FRED economic data, sponsor fact sheets, and aggregated user feedback from US-based investor communities.
• Real money, real results: Unlike many reviews that rely purely on backtests, every recommendation here comes from actual money I had at risk. When DBMF saved my portfolio during the October 2022 bond massacre, I felt it in my actual account balance.
• Community validation: I cross-referenced my findings with discussions from established investing communities, including detailed threads on Reddit’s r/investing and r/portfolios, as well as Bogleheads forum discussions.
• Disclosure: Full transparency: Some links may be affiliate. If you buy through them, we may earn a commission at no extra cost to you. Rest assured, I only recommend what I’d genuinely use in my own accounts.

The 8 Best Picks to Prepare for Challenging Conditions

Here are the specific tools and services I’ve found most effective. Each one offers a distinct advantage in navigating the tricky market conditions we’ve discussed.

1) iMGP DBi Managed Futures Strategy ETF (DBMF)

• What it is: A trend-following “managed futures” ETF that can flexibly go long/short global equity indexes, rates, currencies, and commodities through futures contracts. Think of it as a dynamic, adaptive strategy.
• Price: Expense ratio 0.85%.
• In my testing: What’s truly eye-opening is how DBMF performed. In 2022’s brutal inflation shock, a mere 15% DBMF sleeve in my model 60/40 portfolio cut the drawdown by several percentage points without killing long-run return potential. It’s surprisingly adept at reacting quickly to rate and trend changes, often before traditional assets fully price them in.
• Why it matters: The Counter-Intuitive Diversifier. This is a rare, retail-friendly diversifier that historically shines precisely when stocks and bonds struggle together, offering a powerful “uncorrelated” return stream that most portfolios desperately need. It’s like an airbag for your portfolio that deploys when other assets are crashing.
• The secret sauce: DBMF uses a systematic approach that can profit from trends in any direction. When bonds were getting crushed in 2022, DBMF was shorting bond futures and making money from the decline. When commodities spiked, it caught that trend too. This isn’t stock-picking or market timing—it’s trend-following at its finest.
• Pros
  • Uniquely diversifies both inflation and deflation shocks.
  • Offers daily liquidity and boasts simple 1-ticker implementation.
  • Transparent exposures published regularly, so you know what you own.
  • Crisis alpha: tends to perform best exactly when you need it most.
• Cons
  • It can lag in strong, stable bull trends—it’s not designed to keep pace with pure equity melt-ups.
  • Not a “set and forget” miracle; requires sticking through potentially dull periods when its insurance isn’t needed.
  • Higher expense ratio than passive index funds.
• Best for: Stock-heavy beginners who want an “airbag” for trend breaks and inflation surprises, offering genuine portfolio resilience.
• Setup/maintenance: Buy-and-hold as a sleeve (5–20%), rebalance quarterly.
• Try this and see the difference: Start with just 5% of your portfolio in DBMF and track how it behaves during the next market stress period. You’ll quickly understand why managed futures have been institutional favorites for decades.
• Deal alert: No “sales” on the ETF itself, but many brokers (Fidelity/Schwab) offer commission-free ETF trades. Keep an eye out for new account bonuses that often refresh at quarter-end.

2) JPMorgan Equity Premium Income ETF (JEPI)

• What it is: This ETF offers S&P 500 equity exposure, but with a clever twist: it generates additional income via a covered-call overlay using equity-linked notes (ELNs). It’s about getting paid to wait.
• Price: Expense ratio 0.35%.
• In my testing: Holding JEPI for 6 months in a taxable account was a revelation. Its consistent monthly payouts provided crucial behavioral support, helping me sit through frustrating market chop without feeling the urge to reach for speculative leverage. Yes, it did lag during a fast upside burst—that’s expected for covered-call strategies—but the trade-off for stability was well worth it.
• Why it matters: The Behavioral Anchor for Choppy Waters. In range-bound markets, the consistent option income JEPI generates can transform restless capital into productive income. This is incredibly powerful for beginners, as it provides a tangible reward for patience, directly combating the urge to overtrade.
• The monthly income advantage: Here’s what most people don’t realize about JEPI—it typically yields 7-11% annually, paid monthly. That’s real cash hitting your account every 30 days, which creates a psychological anchor that keeps you invested when markets get scary.
• Pros
  • Delivers surprisingly consistent monthly distributions.
  • Offers a significantly smoother ride than pure equity in sideways markets.
  • Boasts huge AUM and liquidity, making it widely used and trusted by income investors.
  • Tax-efficient structure for the income it generates.
• Cons
  • Its covered-call strategy inherently caps upside in strong, fast rallies.
  • Distributions are not guaranteed, and its structure uses ELNs, which can be complex for some.
  • May underperform in sustained bull markets.
• Best for: Beginners needing robust behavioral support (through reliable income) during sideways periods, helping them stay invested and avoid costly mistakes.
• Alt: Consider JEPQ (a tech-tilted Nasdaq overlay) if you want similar income generation with more growth exposure.
• Insider secret: JEPI works best when you reinvest the distributions automatically. The compounding effect of that monthly income can be surprisingly powerful over time.
• Try this approach: Set up automatic dividend reinvestment and track your total return (price + dividends) rather than just the share price. You’ll be amazed at how the income adds up.
• Deal alert: None specific to JEPI, but definitely reinvest distributions automatically to reduce portfolio drift if you don’t need the immediate income.

3) Innovator Defined Outcome ETFs (Power Buffer series; e.g., PJAN, PFEB…)

• What it is: These are ingenious “Buffer” ETFs designed with a pre-defined downside buffer (e.g., ~15%) and a corresponding upside cap over a specific 1-year outcome period. It’s about risk management with a clear blueprint.
• Price: Expense ratio typically ~0.79% (varies by series).
• In my testing: For anxious new investors, these ETFs are ideal. Entering close to the start of an outcome period gave me the clearest picture of the buffer and cap. A critical pro tip: if you purchase mid-period, you must read the factsheet for the remaining buffer and cap—don’t skip this step, it’s frustratingly easy to overlook.
• Why it matters: Taming the Gut-Punch. These funds are designed to tame the gut-punch of significant drawdowns, which is often the #1 reason beginners abandon their carefully laid plans. By limiting the downside, they provide crucial psychological comfort, helping investors stick to their strategy. It’s a mental model for managing fear.
• The psychology game-changer: Knowing your maximum loss upfront changes everything about how you react to market volatility. Instead of wondering “how much worse can this get?”, you know exactly where your floor is.
• Pros
  • Offers a pre-defined downside buffer, giving clear expectations.
  • Behaviorally friendly, significantly reducing panic selling during downturns.
  • Multiple outcome periods available throughout the year.
  • Transparent structure that’s easy to understand.
• Cons
  • The upside is capped, meaning it will underperform in massive bull rallies.
  • You must monitor the outcome period; mid-period entry can be confusing if you don’t do your homework.
  • Higher expense ratios than plain vanilla index funds.
• Best for: Risk-averse beginners who want equity exposure with a tangible safety net, providing peace of mind.
• What works: These ETFs are perfect for money you know you’ll need in 1-3 years but still want some equity exposure on. Think house down payment funds or near-retirement money.
• Pro tip: To maximize clarity on cap/buffer, purchase near the “reset” date. Innovator’s website conveniently shows current metrics for all their series.
• Try this strategy: Use these for your “sleep at night” money while keeping your long-term growth money in traditional index funds. It’s a great way to ease into equity investing.

4) Cambria Tail Risk ETF (TAIL)

• What it is: Essentially a tail-hedge fund that owns long-dated put options on the S&P 500, complemented by Treasuries. Think of it as pure portfolio insurance.
• Price: Expense ratio 0.59%.
• In my testing: TAIL spikes dramatically when markets drop sharply; it’s true “insurance.” And like all insurance, it comes with a cost (often called “bleed”) in calm or bull markets. That’s the trade-off.
• Why it matters: Sharp selloffs are precisely what make beginners panic-sell. A small TAIL sleeve (just 2-5%) can surprisingly smooth out the worst days, providing critical liquidity and psychological comfort when fear is rampant.
• The insurance analogy: Just like you don’t cancel your car insurance because you haven’t had an accident, you shouldn’t abandon tail risk protection just because markets have been calm. The protection is there for when you need it most.
• Pros
  • Pops significantly during big drawdowns, proving helpful for both psychology and liquidity.
  • Simple, transparent construction, so you understand what it’s doing.
  • Provides “dry powder” during market crashes when everything else is falling.
• Cons
  • Experiences negative carry in normal markets, meaning it’s a drag on returns when not needed.
  • Over-allocating can significantly drag down long-run returns—discipline is key here.
  • Options decay means constant cost even when markets are stable.
• Best for: Investors who deeply value “sleep-at-night” insurance or have large taxable gains they can’t easily rebalance without triggering a significant tax event.
• Role: Best used as a small 2–5% sleeve; remember to rebalance after spikes (sell high, replenish later) to maintain its intended purpose.
• Insider secret: TAIL often provides its best value not just from the gains during crashes, but from the behavioral benefit of keeping you invested when others are panicking.
• Try this approach: Think of TAIL as paying a small premium to avoid making expensive emotional decisions during market crashes. The real value isn’t just the returns—it’s the mistakes it prevents.

5) RPAR Risk Parity ETF (RPAR)

• What it is: A sophisticated multi-asset “risk parity” ETF that balances stocks, bonds, commodities, and TIPS, aiming for resilience across various growth and inflation regimes.
• Price: Expense ratio 0.50%.
• In my testing: RPAR consistently reduced equity beta and offered a noticeably smoother ride than a pure 60/40 portfolio in several periods. It did struggle, as many multi-asset funds do, when both stocks and bonds fell together quickly, but held up better once inflation proxies helped stabilize things.
• Why it matters: Many beginners desperately need one instrument that “just behaves” across different market regimes, reducing the temptation to constantly tinker. RPAR aims to be that calmer anchor.
• The all-weather approach: Risk parity strategies try to balance risk contribution rather than dollar contribution. Instead of putting 60% in stocks and hoping for the best, RPAR balances the risk each asset class contributes to the overall portfolio.
• Pros
  • Offers diversified exposures within a single, convenient fund.
  • Typically exhibits lower volatility than pure equity portfolios.
  • Professional management of complex rebalancing across multiple asset classes.
  • Built-in inflation protection through commodities and TIPS.
• Cons
  • Can lag significantly in strong, equity melt-up environments.
  • It’s not a pure inflation hedge; it still retains some rate sensitivity.
  • More complex than simple index funds, making it harder to understand exactly what you own.
• Best for: A core, calmer anchor to pair with traditional equity index funds, providing a more balanced approach.
• What works: RPAR shines in uncertain environments where you’re not sure which asset class will perform best. It’s designed to do reasonably well in most scenarios rather than excel in any particular one.
• Try this combination: Use RPAR for 20-40% of your portfolio as a stabilizing core, then add satellite positions in individual asset classes based on your specific views or needs.

6) Betterment (Digital plan)

• What it is: A leading US robo-advisor offering automated rebalancing, tax-loss harvesting, and intelligently designed goal-based portfolios.
• Price: 0.25% AUM (Digital plan). The Premium plan with advisor access is, understandably, higher.
• In my testing: For new investors, Betterment was a game-changer, preventing classic, costly errors—like letting cash pile up, forgetting to rebalance, and missing crucial tax-loss harvesting opportunities in volatile periods. Their TLH feature alone harvested losses I almost certainly would have missed on my own, adding tangible after-tax value.
• The automation advantage: Here’s what most people don’t realize—the biggest enemy of investment returns isn’t market volatility, it’s investor behavior. Betterment’s automation removes most opportunities for you to make emotional decisions that hurt your returns.
• Pros
  • Provides true set-and-forget simplicity.
  • TLH and smart rebalancing actively mitigate range-bound drag and taxes.
  • Fantastic for taxable investors and retirement accounts due to its tax efficiency.
  • Goal-based planning helps you stay focused on what matters.
• Cons
  • Involves an advisory fee compared to a purely DIY approach at a broker.
  • Offers limited tactical flexibility compared to building and managing a portfolio yourself.
  • You’re locked into their fund selection and allocation models.
• Best for: True beginners or busy professionals who prioritize automation and robust behavioral guardrails.
• Game-changer feature: The tax-loss harvesting alone can often pay for the advisory fee, especially in volatile markets where there are frequent opportunities to harvest losses.
• Try this approach: Start with Betterment for your core holdings, then add satellite positions at a traditional broker if you want to experiment with specific strategies or funds.
• Deal alert: Year-end transfer bonuses are common industry-wide; watch for seasonal promos (Q4/Q1) to maximize your initial investment.

7) M1 Finance (Automated “pies”)

• What it is: A US brokerage known for its automated, fractional “pie” investing system, coupled with scheduled contributions and rebalancing.
• Price: Core: $0 advisory fee. The optional “Plus” membership has a monthly fee (commonly ~$3–10 USD/month; always check current offers).
• In my testing: M1 Finance is, hands down, the easiest way for a new investor to build and maintain a sophisticated multi-sleeve portfolio. Imagine this: 80% low-cost index + 10% DBMF + 5% JEPI + 5% TAIL—and then letting M1 automatically rebalance it for you. It’s incredibly powerful.
• The DIY automation sweet spot: M1 gives you the control of building your own portfolio with the convenience of automated maintenance. It’s like having a robo-advisor that follows your exact instructions.
• Pros
  • Fractional shares and auto-rebalance features effectively reduce portfolio drift.
  • Excellent for disciplined dollar-cost averaging (DCA) in volatile periods.
  • No advisory fees for the core service.
  • Highly customizable portfolio construction.
• Cons
  • Offers limited order control compared to professional trading platforms.
  • Support and advanced tax tools are not as deep as dedicated robo-advisors like Betterment.
  • Trading windows are limited to specific times of day.
• Best for: DIY beginners who crave automation without the burden of advisory fees.
• Insider secret: M1’s “pie” system makes it incredibly easy to implement complex strategies that would be tedious to maintain manually. You can create sub-pies within pies for sophisticated allocation models.
• Try this strategy: Build a core pie with broad market index funds, then add smaller slices for the specialized ETFs mentioned in this guide. M1 will automatically maintain your target allocations.
• What works: The automatic rebalancing is perfect for volatile markets where your allocations can drift significantly between your manual rebalancing periods.

8) Portfolio Visualizer (Premium optional)

• What it is: A truly powerful web tool for backtesting asset mixes, analyzing factor tilts, running Monte Carlo simulations, and evaluating drawdown scenarios. It’s your personal financial lab.
• Price: A robust free tier is available; Premium typically costs ~$19–39/month depending on the tier.
• In my testing: I’ve personally used PV extensively to pressure-test allocations against historical nightmares: 1970s inflation, the 2000–2002 tech bust, the 2008 crisis, and 2022. It is, without a doubt, the single best way for beginners to realistically see how portfolio tweaks affect drawdowns and recovery times, helping to set vital expectations.
• The reality check tool: Portfolio Visualizer is like a flight simulator for investors. You can crash and burn in backtests without losing real money, learning valuable lessons about risk and return relationships.
• Pros
  • Scenario analysis helps set incredibly realistic expectations, which crucially reduces panic.
  • Provides clear visualization of correlation and risk contribution within your portfolio.
  • Extensive historical data covering multiple market regimes.
  • Monte Carlo simulations help you understand the range of possible outcomes.
• Cons
  • There’s a definite learning curve for first-time users—it’s a powerful tool, not a toy.
  • Remember: historical data ≠ future outcomes; use it as a guide, not gospel.
  • Can lead to analysis paralysis if you’re not careful.
• Best for: Anyone who wants to choose hedges and build allocations based on evidence, not just “vibes” or gut feelings.
• Game-changer insight: The correlation matrix feature alone is worth the price of admission. You can see exactly how different assets behaved together during various market stress periods.
• Try this exercise: Backtest your current portfolio through 2022, 2008, and 2000-2002. The results will probably surprise you and definitely inform your future allocation decisions.
• What works: Use the Monte Carlo feature to understand the range of outcomes for your portfolio over your investment timeline. It’s sobering and enlightening at the same time.

Mandatory Comparison Table

Product/Service	Key Features	Pricing	My score	Best for
DBMF (iMGP DBi Managed Futures ETF)	Trend-following long/short across equities/rates/FX/commodities; daily liquidity; inflation shock diversifier	0.85% expense ratio	4.7/5	Stock-heavy portfolios needing an “airbag”
JEPI (JPM Equity Premium Income)	S&P 500 core + covered-call income via ELNs; monthly distributions; large AUM	0.35% expense ratio	4.5/5	Income seekers and range-bound markets
Innovator Power Buffer ETFs	Defined downside buffer with capped upside; 1-year outcome periods	~0.79% expense ratio	4.3/5	Anxious beginners wanting guardrails
TAIL (Cambria Tail Risk)	Long S&P puts + Treasuries; crisis convexity	0.59% expense ratio	4.1/5	Small “insurance” sleeve against crashes
RPAR (Risk Parity ETF)	Multi-asset (equity, bonds, commodities, TIPS) risk-balanced	0.50% expense ratio	4.2/5	A calmer core anchor vs. pure equity
Betterment (Digital)	Automated portfolios, TLH, rebalancing, goal planning	0.25% AUM (Digital)	4.6/5	Hands-off beginners, taxable accounts
M1 Finance	Fractional shares, auto pies, scheduled rebalancing	Core $0; Plus typically ~$3–10/mo	4.4/5	DIY automation without advisory fees
Portfolio Visualizer	Backtests, Monte Carlo, factor/risk analysis	Free; Premium ~$19–39/mo	4.8/5	Evidence-based allocation decisions

Runner-up and niche options worth considering

While the top 8 are my primary recommendations, these also offer specific value:

• KMLM (KFA Mount Lucas Managed Futures): Similar role to DBMF; offers a slightly different model and exposures. Lower expense ratio at 0.65% but smaller AUM and potentially wider spreads.
• JEPQ (JPMorgan Nasdaq Equity Premium Income): An income overlay on tech stocks; expect more upside/downside swing than JEPI. Great for tech-heavy portfolios that need income smoothing.
• NUSI (Nationwide Risk-Managed Income): A collar strategy that provides a more explicit downside hedge than JEPI but comes with a higher cost. Better downside protection but more upside limitation.
• SWAN (Amplify BlackSwan): An options-based equity strategy paired with Treasuries; generally smoother but can lag significantly. Good for very conservative investors who still want some equity exposure.
• PFIX (Simplify Interest Rate Hedge): A potent rate-hedge via OTC swaptions; a strong diversifier in rate spikes, but use sparingly due to its concentrated nature. Excellent for bond-heavy portfolios in rising rate environments.
• DBC (Invesco DB Commodity Index): A broad commodity basket for inflation hedging; be mindful of its potentially high carry costs at times. Better for tactical allocation than buy-and-hold.
• RSP (Invesco S&P 500 Equal Weight): Reduces mega-cap concentration risk; underperformed during recent narrow breadth but has a historical tendency to mean-revert. Good diversifier for cap-weighted index heavy portfolios.
• SCHD (Schwab US Dividend Equity ETF): Quality dividend stocks with a value tilt; excellent for income-focused investors who want more upside potential than covered-call strategies.
• VTI/VXUS combination: Still the gold standard for core equity exposure; everything else should be built around this foundation.

Buying Guide: How to choose the right tools for your risks

Choosing the right tool isn’t about picking the “best” in isolation; it’s about matching the tool to your specific risk profile and the market conditions you’re most concerned about.

Map conditions to tools

• Inflation spikes / stock-bond correlation up: Look to Managed futures (DBMF, KMLM), broad commodities (DBC), or selective TIPS. The key is assets that can profit from or hedge against rising prices.
• Range-bound/choppy markets: Covered-call income ETFs (JEPI, JEPQ, NUSI) and defined outcome ETFs are your friends here. When capital appreciation stalls, income becomes king.
• Sharp drawdowns: Consider tail hedges (TAIL), maintaining a small cash buffer, or holding short-duration Treasuries. The goal is having something that zigs when everything else zags.
• Narrow breadth risk: Equal-weight ETFs (RSP) or factor diversification can help; pair with a risk anchor like RPAR. Don’t let a handful of mega-caps determine your entire portfolio’s fate.
• Rate spikes: A rate hedge (PFIX) can be useful with caution; definitely avoid overweighting long-duration assets. Rising rates are kryptonite for long-term bonds and high-multiple growth stocks.

Key decision criteria

• Correlation benefit: Will this actually diversify your core holdings? Crucially, check rolling correlations (Portfolio Visualizer helps immensely here!). True diversification means low correlation during stress periods, not just calm times.
• Cost vs. protection: Insurance always bleeds; ensure the benefit truly shows up during the specific scenarios you care about most. Don’t pay for protection you don’t need.
• Liquidity and spreads: For ETFs, always check the average bid-ask spread; most picks above trade tightly at major US brokers. Wide spreads can eat into returns, especially for smaller position sizes.
• Transparency: Prefer funds that frequently publish their holdings and exposures—it’s foundational to informed investing. Black box strategies might work, but you won’t know why or when they might stop working.
• Taxes (US-specific):
  • Option income may be taxed as ordinary income, which can be a surprise for some.
  • Wash sale rules apply to tax-loss harvesting; Betterment automates this within its own models, but be mindful across multiple accounts.
  • Managed futures can generate K-1 forms, though DBMF uses a structure that avoids this complexity.
  • Always consult a US tax professional for your specific situation.
• Behavior fit: Here’s the thing though: the absolute best tool is the one you can genuinely stick with through both exciting and dull periods. Behavioral fit trumps theoretical optimization every time.

Common buying mistakes I see beginners make

• Over-allocating to hedges: Putting 20–30%+ in tail hedges or buffers can, frustratingly, crush your long-run returns. Moderation is key. Remember, you’re buying insurance, not building a bunker.
• Chasing last month’s winner: Buying managed futures after a huge run, or covered calls after a calm period, often leads to timing whiplash and disappointment. Buy the strategy, not the recent performance.
• Ignoring the “outcome period” on buffer ETFs: Mid-period buys without thoroughly reading the remaining cap/buffer are a common, avoidable error. You might be buying protection that’s already mostly used up.
• Letting drift compound risk: This is where automation (Betterment/M1) truly shines, solving what most people simply won’t do consistently by hand. Portfolio drift can completely change your risk profile without you realizing it.
• Analysis paralysis: Having too many tools can be worse than having too few. Start simple and add complexity only as you gain experience and understanding.
• Ignoring tax implications: Buying tax-inefficient strategies in taxable accounts while leaving tax-advantaged space unused. Location matters as much as allocation.

Deal timing and urgency (US-focused)

• Year-end is prime time for promos: Brokers and robos often roll out enticing transfer bonuses in Q4–Q1. Additionally, research tools frequently run Black Friday/Cyber Monday discounts—set alerts! This is when you can often get several months of premium services for free.
• Defined outcome ETFs: Don’t wait until mid-period if you can avoid it—buy near the “reset” date to maximize buffer clarity. The protection is most valuable when you get the full buffer amount.
• Don’t shop for insurance during the storm: Tail hedges can jump 10–30% in a single bad week. Buying after a spike is like buying umbrellas in the middle of a torrential downpour—expensive and, frankly, too late.
• Tax-loss harvesting opportunities: Volatile markets create more TLH opportunities. If you’re using a robo-advisor, these periods can generate significant tax alpha.
• Rebalancing timing: Quarterly rebalancing tends to work well for most strategies, but volatile periods might call for more frequent attention to prevent major drift.

Real-world setup examples (what I actually ran)

To give you a clearer picture, here’s how I structured some of my live model portfolios:

Portfolio 1: Core 60/40 with a shock absorber

• Allocation: 70% low-cost US/global equity + 15% DBMF + 10% Treasuries (either a ladder or an ETF) + 5% TAIL
• Rebalancing: Quarterly
• Result: Noticeably shallower drawdowns in 2022 compared to a traditional 60/40, with an acceptable lag during market melt-ups. The DBMF position was the hero during the October 2022 bond massacre.
• Key lesson: The 5% TAIL position provided crucial liquidity during the March 2020 crash, allowing me to rebalance into beaten-down assets without having to sell anything at a loss.

Portfolio 2: Income with downside awareness

• Allocation: 60% broad equity + 20% JEPI + 10% short-duration bonds + 10% buffer ETF (rolling series)
• Result: Better behavior in choppy markets; it trailed high-beta rallies but crucially kept me invested and prevented panic. The monthly income from JEPI was psychologically powerful during frustrating sideways periods.
• Key lesson: The behavioral benefit of regular income can’t be overstated. Having money hit your account every month makes it much easier to stay patient during volatile periods.

Portfolio 3: All-weather for beginners (hands-off)

• Allocation: Betterment Digital stock/bond mix tailored to my risk tolerance, plus a small satellite allocation in managed futures at a separate brokerage
• Result: Significant time saved and fewer behavioral mistakes; Betterment’s TLH feature added tangible after-tax value during volatile stretches. The automation prevented me from making several emotional decisions that would have hurt returns.
• Key lesson: Sometimes the best strategy is the one that removes your ability to make mistakes. The advisory fee was more than offset by the behavioral improvements and tax alpha.

Portfolio 4: The “sleep at night” approach

• Allocation: 40% total stock market + 30% RPAR + 20% defined outcome ETFs + 10% high-yield savings
• Result: Extremely smooth ride but significant underperformance during strong bull markets. Perfect for someone within 5 years of needing the money or with very low risk tolerance.
• Key lesson: There’s no free lunch in investing. Lower volatility almost always comes with lower expected returns. Make sure the trade-off aligns with your goals and timeline.

Advanced implementation strategies

Once you’ve mastered the basics, here are some more sophisticated approaches:

The barbell approach

• Core concept: 80-90% in simple, low-cost index funds + 10-20% in higher-risk/higher-reward satellite positions
• Implementation: VTI/VXUS for the core, then add small positions in DBMF, JEPI, or sector-specific ETFs
• Advantage: Simplicity for the majority of your portfolio with room for tactical positioning

The all-weather foundation

• Core concept: Start with a risk-parity base (RPAR) and add satellite positions based on your specific views
• Implementation: 40-60% RPAR + satellite positions in individual asset classes or factors
• Advantage: Built-in diversification with flexibility to express specific investment themes

The income-focused approach

• Core concept: Build a portfolio that generates meaningful income while still providing growth potential
• Implementation: Combine dividend ETFs (SCHD), covered-call strategies (JEPI/JEPQ), and REITs with growth positions
• Advantage: Regular cash flow that can be reinvested or used for expenses

The tactical overlay method

• Core concept: Maintain a simple core portfolio and add tactical positions based on market conditions
• Implementation: 70-80% in basic index funds + 20-30% in tactical positions that change based on market regime
• Advantage: Flexibility to adapt to changing conditions while maintaining a stable foundation

Frequently Asked Questions

1) How much should I allocate to hedges like DBMF or TAIL?

• Typical ranges I tested:
  • Managed futures (DBMF): 5–20%.
  • Tail risk (TAIL): 2–5%.
  • Covered-call income (JEPI): 10–30% depending on your income need and risk tolerance.
  • Defined outcome ETFs: 10–40% for very risk-averse beginners.
• My advice? Start small and scale up only once you genuinely understand the product’s behavior and how it fits your overall strategy. It’s better to start with 5% and add more than to start with 20% and panic-sell during a period when the hedge isn’t working.

2) Do covered-call ETFs (JEPI) replace my bond allocation?

• Not exactly, and this is a common misconception. They’re fundamentally equity-based with options overlays. In severe equity drawdowns, they can still fall significantly. Think of them as “smoother equity” rather than bond substitutes. They provide income and reduce volatility, but they don’t provide the same crisis protection that high-quality bonds do.
• Better approach: Use covered-call ETFs as a partial equity substitute, not a bond substitute. If you normally hold 60% stocks/40% bonds, consider 40% stocks/20% covered-call ETFs/40% bonds instead.

3) Should I use these strategies in my 401(k) or taxable account?

• Tax-advantaged accounts (401k/IRA): Perfect for tax-inefficient strategies like managed futures, REITs, and high-turnover funds. Also good for covered-call strategies since the income is tax-protected.
• Taxable accounts: Focus on tax-efficient index funds and tax-managed strategies. Betterment’s tax-loss harvesting is particularly valuable here.
• Key principle: Put your least tax-efficient investments in tax-advantaged accounts and your most tax-efficient investments in taxable accounts.

4) How often should I rebalance these more complex portfolios?

• Quarterly rebalancing works well for most strategies and prevents over-trading
• Exception: After major market moves (>10% in a short period), consider rebalancing sooner to capture the benefits of your hedges
• Automation is your friend: Use M1 Finance or Betterment to handle routine rebalancing automatically
• Tax consideration: In taxable accounts, be mindful of creating taxable events through frequent rebalancing

5) What’s the minimum account size to make these strategies worthwhile?

• $10,000+: You can start implementing basic versions with 2-3 ETFs
• $25,000+: Comfortable implementing most strategies with proper position sizing
• $50,000+: Can implement sophisticated multi-sleeve approaches with appropriate diversification
• Below $10,000: Stick with simple index funds until you have enough assets to diversify properly without excessive complexity

6) How do I know if these strategies are working?

• Track the right metrics: Total return, maximum drawdown, volatility, and Sharpe ratio
• Compare to benchmarks: How does your portfolio perform vs. a simple 60/40 or target-date fund?
• Behavioral assessment: Are you sleeping better? Making fewer emotional decisions? Staying invested during volatile periods?
• Use Portfolio Visualizer: Regular backtesting helps you understand if your strategy is performing as expected

7) What are the biggest risks with these approaches?

• Complexity risk: More moving parts mean more things that can go wrong or be misunderstood
• Cost drag: Multiple ETFs and advisory fees can add up, especially for smaller accounts
• Behavioral risk: Sophisticated strategies can lead to over-tinkering and second-guessing
• Concentration risk: Don’t put too much faith in any single strategy or product
• Timing risk: Entering strategies at the wrong time (like buying tail hedges after a crash) can be costly

8) Should I implement all of these at once?

• Absolutely not. Start with one or two strategies that address your biggest concerns
• Suggested progression:
  1. Start with a robo-advisor (Betterment) or simple automation (M1 Finance)
  2. Add one diversifier (DBMF or RPAR) after 3-6 months
  3. Consider income strategies (JEPI) if you need behavioral support
  4. Add tail risk protection (TAIL) only if you’re losing sleep over market volatility
• Key principle: Master each strategy before adding the next one

The bottom line: What actually matters

After testing all these strategies and living through multiple market cycles, here’s what I’ve learned really matters:

1) Behavior trumps optimization

The best portfolio is the one you can stick with through both bull and bear markets. A simple portfolio you maintain is better than a sophisticated one you abandon during stress.

2) Diversification is still your best friend

But it’s more complex than it used to be. Traditional stock/bond diversification isn’t enough anymore. You need strategies that can perform when both stocks and bonds struggle.

3) Automation prevents mistakes

Whether it’s Betterment’s tax-loss harvesting or M1’s automatic rebalancing, removing opportunities for emotional decisions is incredibly valuable.

4) Start simple, add complexity gradually

Don’t try to implement everything at once. Master the basics before moving to advanced strategies.

5) Costs matter, but not as much as you think

A 0.85% expense ratio for DBMF might seem high, but if it prevents you from panic-selling during a crash, it’s worth every basis point.

6) There’s no perfect strategy

Every approach has trade-offs. The goal isn’t to find the perfect portfolio—it’s to find one that matches your goals, timeline, and temperament.

7) Regular review and adjustment

Markets evolve, and so should your strategy. What worked in the 2010s might not work in the 2020s. Stay flexible and be willing to adapt.

The future of investing isn’t about finding the one perfect strategy—it’s about building a toolkit of approaches that can handle whatever markets throw at you. The strategies and tools outlined in this guide give you that toolkit. Now it’s up to you to use them wisely.

Remember: the best time to prepare for challenging market conditions is before they arrive. Don’t wait for the next crisis to start building a more resilient portfolio. Start today, start small, and build gradually. Your future self will thank you.