Mutual Funds With the Lowest Drawdowns

With all the stock market's recent jolts, it's only natural that many investors are searching for a degree of shelter.

But where should you turn when not just stocks, but bonds and commodities have been subject to frequent and severe downturns?

It stands to reason that mutual funds that have proven the most resistant to big market swings in the relatively recent past would be the safest bets in the current environment, too.

Arguably, the best measure of a fund's resilience isn't just whether or not it avoided losing money during a given period, but the biggest drawdown, or peak-to-trough descent, that it registered during the period.

For example, a fund can appreciate by 12%, then have a drawdown of 6%, and still be up 5.3% overall.

So funds with low drawdowns don't just tend to hold their heads above water, they also have a tendency to hold on to most of their gains.

The measure disregards the length of time between the peak and the trough. It also ignores performance prior to the interim peak and subsequent to the trough.

The dozen open-end stock funds in the accompanying table (see below) have proven their staying power over the past three years by registering drawdowns of a lower magnitude than minus 6% during the period (meaning closer to zero than negative 6%).

The data is based on month-end returns, so in theory the funds could have had even bigger drawdowns intramonth.

All of the funds have a track record of at least three years and allocate at least 75% of net assets to equities.

STOCK FUNDS WITH 3-YEAR DRAWDOWNS OF LESS THAN 6% SUB
NAME, GRADE & TheStreet.com RATINGS GRADE	OBJECTIVE	3-YR. DRAW- DOWN (%)	PCT. IN STOCKS	12-MO. TOTAL RET'N (%)	3-YR. ANN'L RET'N (%)
Gateway Fund (GATEX) C-	Growth & Income	-3.39	96.0	9.60	8.10
Delaware Conservative Alloc Port A (DFIAX) D+	Asset Allocation - Domestic	-3.83	92.5	9.37	7.21
C/Fund (CFUNX) C+	Growth & Income	-5.27	96.4	17.51	8.72
Wells Fargo Avtg Cnsrv Allc Adm (NVCBX) D	Balanced - Domestic	-5.35	80.0	8.36	5.59
Aston Montag & Caldwell Balanced N (MOBAX) D+	Balanced - Domestic	-5.40	98.9	12.25	6.35
Fairholme Fund (FAIRX) B+	Growth - Domestic	-5.53	79.8	14.90	18.95
Delaware Moderate Allocation Port A (DFBAX) C-	Asset Allocation - Domestic	-5.66	96.5	11.85	9.42
Dreyfus Socially Resp Growth S (N/A) D+	Growth - Domestic	-5.67	99.4	15.11	7.97
Waddell & Reed InvestEd Conserv A (WICAX) D	Growth - Domestic	-5.74	99.5	6.85	4.97
CSI Equity Fund Inv (CSIIX) B+	Growth - Domestic	-5.90	98.5	17.29	12.08
MTB Mngd Alloc-Conserv Gr A (VMCGX) D	Asset Allocation - Domestic	-5.92	98.0	7.62	5.01
Evergreen Balanced B (EKBBX) D	Balanced - Domestic	-5.99	75.1	10.52	7.51
AVERAGE (MEAN) OF ALL STOCK FUNDS		-14.62
S&P 500 TOTAL RETURN INDEX		-7.46		16.13	11.75
Source: TheStreet.com Ratings (data as of 7/31/2007).