With the S&P 500 down 23% year to date, you might be looking for opportunities to get into the stock market at reasonable prices.
If you want to do it through mutual funds, Morningstar put together list of the “Thrilling 31” funds. Morningstar started with a universe of 15,000 funds. It screened for funds with the following characteristics:
· Expense ratio in the Morningstar category's cheapest quintile.
· Manager investment of more than $1 million in the fund.
· Morningstar risk rating lower than high.
· Morningstar analyst rating of bronze or higher (the higher levels are silver and No. 1 gold).
· Parent pillar rating better than average. That rating measures the fund company’s quality.
· Returns greater than the fund's category benchmark over the manager's tenure for a minimum of five years.
· A minimum investment no greater than $50,000.
Gold-Rated Funds
Here are five of the gold-rated funds on the list:
· American Funds American Mutual (AMRMX)
· Dodge & Cox Global Stock Fund (DODWX)
· T. Rowe Price Mid-Cap Growth (RPMGX)
· Vanguard Dividend Growth (VDIGX)
· Vanguard Wellington (VWELX)
American Funds American Mutual: “The fund is cautious by design,” writes Morningstar analyst Alec Lucas. “It focuses on dividend-paying industry leaders.”
The fund offers downside protection. Since 1950, it has beaten the S&P 500 in all 17 market declines of 15% or more, he said. “The fund won’t shine in rallies, but it tends to be competitive over a cycle.”
Dodge & Cox Global: The fund has a contrarian value strategy. It focuses on developed nations but will also go into emerging markets.
Its value investments might take time to work out, “but the Dodge & Cox team is patient and opportunistic,” writes Morningstar analyst Tony Thomas. “Selective currency hedging, and occasional use of derivatives help temper some of the strategy’s risks.”
T. Rowe Price Mid-Cap Growth: The fund emphasizes paying reasonable prices for future cash flow and earnings in growth companies. “Few strategies can match this one’s long track record of success and proven, disciplined process,” writes Morningstar analyst Adam Sabban.
Vanguard Dividend Growth: The managers’ “approach to building the fund’s 40- to 50-stock portfolio blends disciplined, benchmark-agnostic focus on firms likely to continue increasing their dividends at a double-digit rate with a willingness to learn and adapt,” Lucas writes.
In bull markets, “the fund can look anemic next to most peers,” he said. “However, it tends to make up lost ground in down markets.”
Vanguard Wellington: The fund targets “high-quality, dividend-paying large caps with a durable edge, while remaining disciplined about valuation,” writes Morningstar analyst Patricia Oey.
The managers are willing to pay more for firms they believe have long-term growth opportunities, she said.
The author of this story owns shares of Vanguard Dividend Appreciation ETF.
