In the world of mutual funds, slow and steady wins the race. By measuring for consistently good performance, along with factors that we always look for in good funds, such as a disciplined stock-picking style, below-average to average fees and an absence of sales charges, we've come up with six funds that promise reliable returns in any market.
What do they have in common? Low turnover. Managers of these cream-of-the-crop funds tend to hold on to their stocks far longer than their peers.
Company people. The managers tend to view their investments as a partnership with a business and with the people behind the business, rather than as just a stock purchase.
Compact portfolio. This refers not to the size of a portfolio but to the number of stocks it holds. With one exception, the best funds are not loaded with hundreds of stocks.
Click through to see our six picks of top-notch, low-minimum, no-load funds that score high on the consistency meter. (And see the last slide to learn more about our methodology).
Homestead Small-Company Stock
Homestead Small-Company Stock (symbol HSCSX), a member of the Kiplinger 25, was the most consistent fund on our list. It outpaced its benchmark in 69% of the rolling 12-month periods, compared with just 54% for the average small-company fund.
The managers spend a lot of time on the road in far-flung places trying to find under-the-radar, out-of-favor firms that have a catalyst to turn their businesses around. They prefer businesses they understand, so the fund is heavy with industrial stocks (25% of assets at last report) and light on technology (just 11% of assets). Holdings range from the relatively familiar
Homestead is undergoing change at the top. Longtime managers
Baron Partners Fund
For decades, Ron Baron's eponymous fund shop has made his clients richer by taking a long-term approach to investing in fast-growing small and midsize companies.
Partners can invest in companies of any size, but most of its stocks have market values of less than
Partners has held some stocks for a decade or longer. Shares of
Hennessy Cornerstone Mid Cap 30
Hennessy Cornerstone Mid Cap 30 (HFMDX) isn't an index fund, but it isn't actively managed day to day, either. In fact, for most of the year the portfolio changes little. Yet despite this inaction, Cornerstone has outpaced the Russell Midcap index by an average of one percentage point per year.
Once a year, Cornerstone invests an equal share of its assets in 30 stocks. The holdings are the result of screens that target U.S. companies with market values of
Dodge & Cox International Stock
A lot of teamwork goes into each stock pick at Dodge & Cox International Stock (DODFX), a member of the Kiplinger 25. The nine comanagers zero in on firms with good balance sheets, attractive growth prospects and executives who act like owners--and stocks that trade at bargain prices. The process has delivered steady results. In the fund's 13 full years of operation (including the first 11 months of 2014), it lagged the EAFE index in only two calendar years. "Everything we do at our firm, from how we are organized and managed to how we approach investing, is geared to being able to build conviction in each stock and stick with that conviction," says comanager
The managers may follow some companies for a decade before they buy shares, as they did before investing in
Fidelity Contrafund
Few stock fund managers can boast a tenure of 25 years at the same fund, and only six have done so as the sole manager. But come September, Fidelity Contrafund (FCNTX) manager
Danoff has always been a growth-oriented investor. If a company can double its earnings in five years, he has always believed, then the stock price will double, too. But over time, he says, he has become more willing to invest in businesses that are improving and less interested in paying crazy prices for growth. He still keeps an eye out for established companies that have an edge (think
And he has learned to focus on his best ideas. Danoff spends much of his day "turning over rocks" in search of good prospects, and over the course of a year he may meet with execs from 1,000 firms. But he has learned to dial back a little on the number of holdings in his portfolio, even though Contra's assets total
Primecap Odyssey Growth
The managers of Primecap Odyssey Growth (POGRX) don't waste time talking to reporters. We're not offended--not when Odyssey Growth has produced a 10.6% annualized return over the past 10 years. Indeed, we're happy to let the fund's four managers--
As bargain hunters, the managers often buy what others are dumping. For instance, they recently picked up shares of retailer
About our Methodology
We sifted through the performance of nearly 1,500 diversified stock funds over 121 discrete 12-month periods, pitting funds against their benchmarks month after month, year after year. The concept is known as "rolling returns." We started with the one-year period from
For each of those segments, we compared the funds' results against appropriate benchmarks. Large-company funds had to prove their mettle against Standard & Poor's 500-stock index. We stacked up midsize-company funds against the Russell Midcap index. Small-company funds faced off against the Russell 2000 index, which tracks the little guys. And funds that focus on large foreign companies went toe-to-toe with the MSCI EAFE index, which follows the same kinds of stocks. For the purpose of our analysis, we declared a fund to have beaten its benchmark if it topped it by 0.5 percentage point or more, a fairly stringent requirement.
Of course, we also considered other factors that we always look for in good funds: a disciplined stock-picking style, below-average to average fees and an absence of sales charges, and solid long-term returns. Plus, did the fund have the same manager over the 10-year period we sliced and diced? Although our screen included funds sold to institutional investors, we focused on those that require less than
Comment by clicking here.