Balanced Mutual Funds Offer Stability
NEW YORK (TheStreet) -- At a time when markets are swinging wildly, balanced funds have proven to be lifesavers.
These funds hold mixes of stocks and bonds. While the bond holdings cushion the funds during downturns, the stocks enable them to deliver competitive results during rallies. So far this year, Morningstar's conservative allocation category -- including the most cautious balanced funds -- has returned 1.0%, while most all-stock funds have sunk into the red.
Typical balanced funds hold about 60% of assets in familiar blue-chip stocks and 40% in high-quality bonds. But some winning funds have shown they can produce compelling results by departing from the usual script.
The winners put varying allocations in small stocks, foreign securities or lower-quality bonds. The top performers include Villere Balanced (VILLX), WHG Income Opportunity (WHGIX) and Thornburg Investment Income Builder (TIBAX).Villere Balanced boasts one of the strongest records, returning 4.8% annually during the past five years, outdoing 99% of its peers in the moderate allocation category. The fund buys stocks of all sizes and is willing to hold some bonds that are rated below-investment grade. The fund focuses on unloved stocks that have the potential to grow 18% annually for sustained periods in the future. To avoid trouble, the managers stick with companies that have secure market positions and solid balance sheets. While they own some large-cap stocks, the portfolio managers tend to favor small and mid-cap shares. "The big blue-chips may be dependable, but they can't necessarily deliver the kind of sustained growth that we prefer," says portfolio manager George Young. A favorite holding is Euronet Worldwide (EEFT), which operates ATMs in Europe. Revenues have grown smartly lately, but the shares have stagnated as investors worry about European debt problems, says Young. He also likes Jos. A. Bank Clothiers (JOSB), which operates 515 men's clothing stories. Running frequent sales, the chain has been growing smartly. The balance sheet is rock-solid, including more than $9.00 per share in cash. Another top-performing fund is WHG Income Opportunity, which returned 5.3% annually during the past five years, outdoing 98% of competitors in Morningstar's conservative allocation category. Portfolio manager Mark Freeman aims to deliver solid total returns while limiting volatility. To accomplish this goal, he holds income-producing assets, including dividend-paying equities, bonds, convertibles, master limited partnerships and cash.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV