This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Safe Funds That Delivered Winning Returns

Stocks in this article: BUFBX SIRAX WBALX

NEW YORK ( TheStreet) -- With markets climbing lately, investors have been putting cash into stock mutual funds. Plenty of Wall Street analysts are encouraging the optimism, arguing that the economy is bound to accelerate. Maybe so. But as Washington and Europe struggle with debt burdens, the road ahead is bound to have rough patches.

To limit risks, consider adding a cautious fund to your portfolio. Top choices include Buffalo Flexible Income (BUFBX), Sierra Core Retirement (SIRAX), and Weitz Balanced (WBALX). The funds hold mixes of stocks and bonds, seeking to protect shareholders in downturns. Most often the cautious approaches have worked. All three funds shined during the turmoil of 2008, and they have outdone the S&P 500 by a wide margin during the past five years.

Sierra Core Retirement aims to avoid losing more than 4% in any downturn. So far the fund has succeeded. While the S&P 500 lost 37% in 2008, Sierra only declined 3.3%. During the past five years, Sierra has returned 8.1% annually, surpassing the S&P 500 by 3 percentage points.

Sierra invests in other mutual funds. Portfolio manager Ken Sleeper holds a mix of stock and bond funds, shifting the allocation as market conditions change. He looks for funds that excel in up and down markets.


Sierra can hold up to 40% of assets in stocks, but lately, Sleeper has moved away from stocks entirely. Instead, he has a big stake in high-yield bond funds. Holdings include Neuberger Berman High Income (NHIAX). Sleeper acknowledges that high-yield bonds have rallied in recent years, but he says that they still yield 6%, a tempting payout at a time when the S&P 500 yields 2.0%.

When stocks rise, high-yield bonds also tend to climb, he says. This occurs because investors bid up bond prices as the economic outlook improves and default risk declines. In downturns, high-yield bonds typically lose less than equities. "With high-yield funds, you can get equity-like returns without all the risk," Sleeper says.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs