Yes, it's happened again. In another example of Wall Street's impeccable timing, a host of new funds designed to protect you from market losses have just hit the market -- long after most investors have already taken big losses.

If your first reaction is that these offerings seem a little late to do anyone any good, you're not the only one. Although the funds are designed to appeal to those who are still smarting from the past year and a half, most investors don't need new strategies in order to invest successfully. And with stocks already having been hit hard, the protection these funds claim to offer has a lot less value than it did a year ago.

Absolute return and you
One popular phrase among these new funds is absolute return. Taken from the hedge fund world, the idea behind absolute-return funds is both simple and attractive: rather than having to see your portfolio rise and fall with the markets, these funds try to deliver strong long-term returns regardless of market conditions.

How they'll go about doing that isn't entirely clear. One fairly aggressive new fund, Putnam's Absolute Return 700 Fund (PDMAX), had 86% of its portfolio in bonds and cash as of May 31. Moreover, the stocks it owns are some of the same ones you'd expect to find in most portfolios: common holdings like ExxonMobil (NYSE:XOM), Raytheon (NYSE:RTN), and Western Digital (NYSE:WDC). Given the fund's stated objective of exceeding returns on Treasury bills by seven percentage points, the current emphasis on bonds seems unsustainable.

Typically, though, absolute-return funds take advantage of their access to less commonly held types of assets, such as commodities and real estate, to spread risk and diversify their portfolios. With many of those assets all the rage lately, it's no surprise that absolute-return funds are taking advantage of their popularity by including them among their holdings.

Why bother?
But for those actually considering these funds, let me throw out two ideas.

First, if you were looking for a way to protect your portfolio, why would you buy a fund like this now? Despite the huge rally since March, stocks are still down 40% from their 2007 highs. The time when you really could have benefited from this sort of protection was back then -- when you still had gains to protect.

Second, you shouldn't get the idea that these funds are particularly novel. Absolute-return and similar market-neutral strategies have been around for a while, and they've had mixed results. While they didn't suffer anything close to the losses that stock funds did, they weren't able to deliver the positive returns that many investors expected. For example:

Fund

2008 Return

2009 Year-to-Date Return

Nakoma Absolute Return (NARFX)

(4.3%)

(2.5%)

TFS Market Neutral (TFSMX)

(7.3%)

8.4%

JPMorgan Multi-Cap Market Neutral (OGNIX)

(0.2%)

0.5%

Source: Morningstar.

Better alternatives
More importantly, the absolute-return concept just feeds investor fear of volatility, when you should embrace volatility. Although most investors prefer smooth, steady returns over bumpy ones, the most important thing ultimately is how much money you make. In many cases, volatility brings opportunity. And now is the time to capitalize on it, rather than trying to hide from it.

From that perspective, you're better served by lower-cost alternatives that give you a diversified set of investments. You can get broad-based stock and bond funds at a tenth the cost of some absolute-return funds.

In addition, if you want other asset classes in your portfolio, real estate investment trust funds like Vanguard REIT Index ETF (VNQ) give you exposure to real estate investments such as Public Storage (NYSE:PSA) and Equity Residential (NYSE:EQR). And while specialized exchange-traded funds that give you direct exposure to commodities exist, you can often get similar results by buying commodities-related stocks, such as Archer-Daniels-Midland (NYSE:ADM) for agricultural commodities, or miners like BHP Billiton (NYSE:BHP) for metals.

Absolute-return funds aren't necessarily a waste of time. But don't fall prey to the idea that they're a panacea. In the long run, you'll have better results from embracing market ups and downs than by trying to avoid them -- especially after the market has already fallen.

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Fool contributor Dan Caplinger isn't averse to new products, as long as they're good. He doesn't own shares of the companies mentioned. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy is always right on time.