Be Prepared: Mutual Funds That Are Ready for Any Market

NEW YORK (TheStreet) -- Most mutual funds focus on a narrow niche, such as small-cap growth or large-cap value. But there's a better way.

A few managers take an all-cap approach, holding stocks of all sizes. So why would that benefit investors?

In recent years, small stocks have soared. That has helped top all-cap managers outdo the large stocks of the S&P 500 . When small-caps move to the back of the field, the all-cap funds will lag too. But because of their diversification, the all-cap funds can deliver decent results under many market conditions.

Solid choices include Barrow All-Cap Core (BALAX), Davidson Multi-Cap Equity (DFMAX) and Keeley All-Cap Value (KACVX). Over the past 12 months, BALAX is up 24.7%, DFMAX is up 24.5% and KACVX is up 22.8%. By comparison, Vanguard's Total Stock Market Index Fund (VTSMX), which captures all stocks in the U.S. market in proportion to their market value, is up 20.5%, while the S&P 500 is up 19.3% over the same time frame.

Some all-cap funds shift their allocations as conditions change. During the turmoil of 2008, Keeley All-Cap Value had half its assets in depressed small stocks, with the rest in mid and large caps. Then as small stocks rallied, the fund began shifting to cheaper large caps. Keeley now has only 17% in small caps. "We have the ability to move around the markets to find values," says portfolio manager Ed Ciskowski.

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