After a Plunge, Balanced Funds Can Lift You Up

Both Vanguard funds are fine choices. For investors who shop outside Vanguard, a strong balanced selection is Manning & Napier Pro-Blend(EXBAX). The fund excels in downturns by holding high-quality bonds and a diversified mix of stocks that include growth and value names.

Wiener's study suggests that investors who want to bet on a rebound can fine-tune their approaches. Those who crave safety can stick with low-risk balanced funds. More aggressive shareholders can try funds that are almost entirely in stocks. On average, stock funds recorded bigger gains during rebounds -- and suffered more losing years than balanced funds did. Vanguard Windsor(VWNDX), a large-value portfolio, gained an average of 29.2% during the recovery periods, but suffered six losing years. Vanguard International Value(VTRIX) returned 27.6% and recorded eight losing years.

Investors who seek a middle ground should consider convertibles funds. During the 50 periods in the study, Vanguard Convertible Securities(VCVSX) only had four losing years, yet the fund delivered a strong average gain of 23.7%.

Convertibles could be an intriguing choice for today's market conditions. Convertibles are bondlike issues that can be converted to stocks. The securities are hybrid instruments with qualities of bonds and stocks. Convertibles typically yield more than stocks and a bit less than bonds. Vanguard Convertible currently yields 4.0%. The rich yield helps cushion convertibles funds during market downturns. When stocks rise, convertibles tend to climb.

For a resilient choice, consider Calamos Convertible(CCVIX). The fund has outdone most competitors in downturns and delivered decent results in bull markets. That kind of consistent performer can be an ideal choice for investors who seek funds that can cushion portfolios during hard times and rally in bull markets.

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