Smoothest Mutual Funds Offer Stability in Volatile Times
Volatility, the traditional enemy of conservative investors, has mounted a strong challenge to their confidence level in 2011.
The bright side of the topsy-turvy situation, if there is one, is that it has added to the luster of smooth-performing investments. While such careful choices won't be leaders in hot markets, they provide a desirable safety net in downturns.
Basically, they are the least likely to surprise you or to lose your money.
"The benefit of this market volatility is that investors now understand when they invest in stocks that it is important to look to high-quality stock names paying dividends," said
There's more "horsepower" available to all investors today than even five years ago, said Wright. The proliferation of index funds and many other investment strategies provides the investor with a level of psychological comfort based on exactly "how he or she is wired," said Wright. The right mix is there somewhere.
"Conservative balanced (stock and bond) funds hold up well during periods of volatility," said
Strong balance sheets of companies whose stock a fund owns pay off in bear markets.
Emphasizing consumer goods, energy and health care,
One of the least volatile international funds, said Salzinger, is the
Financial services, industrial materials and consumer goods are the fund's biggest concentrations. Top stocks are
"The more broadly diversified a fund portfolio is, the better equipped it is to deal with volatility in pockets of the market," said
Another fund Tjornehoj favors, the
The focus is on a portfolio of dividend-paying stocks and fixed income securities. That no-load fund requires an initial
In a robust stock market these funds won't perform dramatically because "there's no free lunch out there," Tjornehoj said. In fact, it is nearly impossible to find any investment that provides the strongest long-term return with low volatility, he said. But more than ever before, investors must resist the allure of overly focused funds.
"Five years ago there weren't as many flavors of exchange-traded funds (ETFs) available, and I think these ETFs have become a big distraction for some investors," he warned. "A lot of ETF strategies in extremely specific niches have done well this year, but to extrapolate that into long-term performance is hazardous."
Salzinger also recommends the smooth-sailing
The Vanguard target funds aim for various future dates, but all eventually evolve into this fund's final portfolio that consists of shares in other mutual funds. This "no-load" (no sales charge) fund with initial
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