Down 7% While the S&P Sank 19%: Inside INCM’s Defense

True diversification goes beyond owning different stocks to holding assets that behave differently when the market drops.

During a punishing 2025 selloff, the S&P 500 fell 18.8%, erasing months of gains and leaving many investors rattled. But Franklin Income Focus ETF (INCM) told a different story, with a return of -7.2% over the same period. That is the kind of resilience that can make a real difference in a portfolio when volatility strikes.

INCM holds a mix of stocks and bonds, but it does not move in lockstep with the broader market. It seeks income by investing in a broad, multi-asset portfolio that includes everything from dividend-yielding stocks and convertible securities to various types of bonds. This diverse approach is designed to adapt to changing market conditions.

How Has It Behaved In Market Drops?

The fund’s defensive character is not a one-time fluke. Its record across recent market downturns is remarkably consistent. In a 2024 selloff when the S&P 500 fell 8.4%, INCM returned just -0.9%. More recently, during a 2026 dip where the S&P 500 fell 8.9%, the fund returned +0.0%, holding perfectly flat.

This steadiness is also reflected in its day-to-day behavior. Over the past year, INCM has run at about 6% annualized volatility. For comparison, the S&P 500 ran at about 13% over the same period. That is a significantly calmer ride.

What Kind Of Shield Is This?

This is a stay-invested form of defense. INCM does not try to time the market by moving to cash. Instead, it keeps you in the game but in a lower-volatility corner. By holding a mix of assets like dividend-yielding stocks, corporate debt, and government bonds, it aims to generate income and cushion the portfolio when more aggressive growth stocks are selling off. It is designed to fall less, which can be a powerful anchor in a storm.

Does It Defend Every Single Time?

The fund’s recent record is clean. According to the data, across the last 3 S&P 500 drawdowns, INCM held up in 3 of them. But no defense is a guarantee, and even a strong track record of holding up in past selloffs does not promise it will do so in the next one. Market conditions are always changing, and any investment carries risk.

So, Where Does This Fit In A Portfolio?

The real question this fund raises is one of asset allocation. It is worth looking at your own portfolio and asking a simple, practical question: do you own anything that has historically held its ground when the market falls? For investors looking for a way to stay invested while potentially softening the blows of a market decline, a fund like this offers one possible answer. It is not about predicting the next drop, but about being prepared for the inevitable volatility of investing.

Is There A Fund That Defends Even Better?

Knowing INCM held up is a start, but it raises the sharper question: is it the best at this, or does another fund cushion a selloff even more for less of a trade-off? That is worth checking before you lean on any single defender.

Our Drawdown Defenders screen answers it directly. It ranks the funds that held up across the recent S&P 500 selloffs by how far they beat the S&P during those drops, how many of the selloffs each one defended, and what they have actually returned since, with annualized return, volatility, Sharpe, and Sortino all measured over the same stretch. It leans toward the defenders that kept their upside too, not just the funds that sat out the drop, so you can see where INCM sits and which funds protected without giving up as much. For the wider picture on valuation and long-run performance, the ETF Valuation and Performance Scorecard ranks the major funds side by side.

The Catch With Playing It Safe

There is a catch worth saying plainly. A fund that barely moves when stocks fall usually barely moves when they rally, either. Lean too hard on defenders, and you trade away the upside that actually grows a portfolio over time, swapping one regret for another. The aim is not maximum defense; it is the right balance between protecting the downside and still owning the recovery.

That balance is the idea behind our High Quality (HQ) Portfolio: a rules-based, multi-factor mix built to participate in the upside while screening for the quality and resilience that softens the falls, re-balanced on a schedule so no single shock, and no single defensive bet, decides the outcome. It has a record of outpacing a benchmark that combines the three major indices – the S&P 500, S&P Mid-cap, and Russell 2000.