Gyroscopic Investing

It seems most people like to tinker with PP to avoid gold or bonds.  I happen to be comfortable with both, but I have an almost visceral dislike of equities.  I have PRPFX precisely so I don't have equities staring me in the face.

Eventually I'd like to do the real thing though.  I already have a starter position in GLD and TLT... I just can' pull the trigger on VTI.

Recently I came upon "convertibles" as a possible equity substitute, and even bought some for my variable portfolio.  I categorize converts as "pseudo-stocks".  Going back a few decades, they seem to do better than stocks in bull markets and less bad in bear markets. 

Any comments on this substitution?  (Aside from "stay the course!" and "don't tinker!" )

Don't mess with convertibles. Just buy the stocks. A stock bull market will leave everything else in the dust.

There's no need for backtesting. When I was running my company we actually issued convertible notes to some shareholders. So I have some first hand knowledge of the situation. I don't believe there is a standardized index to compare convertible securities vs. stock. But the idea is that you are kind of riding the fence. They pay interest like a bond but can be converted to stock as the note holder thinks benefits them. But the problem is that this can be highly speculative behavior. Also it is has high manager risk because there is likely a lot of hands on work needed to do the investing. There is also a higher expense ratio and expense ratio is often the #1 predictor of how a fund may do going forward. Finally, if you look at the holdings in that fund it's all junk rated, or near junk rated. Only 4% is even A rated, the rest is BBB, BB, B or CCC and lower! So if you are scared about equities, then this fund is not likely to be safer.

I like things simple and a convertible note fund could do many unpredictable things depending on a variety of variables. This is why I think it's a bad idea to own one vs. just a plain old fashioned stock index. There are enough surprises in the investing world that we don't need to go out and look for new ones.