It’s a crazy market out there right now. Europe still is in turmoil, but the stock market has rallied strongly to start 2012. The tech-heavy Nasdaq has added almost 15% since Jan. 1, but “safe” stocks like Coca-Cola (NYSE:KO) and Procter & Gamble (NYSE:PG) have barely posted a profit in the same period.
It’s the way of the world in this challenging economic environment. One day the market is up or your portfolio is in favor, and the next day things get shaky and you record some short-term losses.
But take heart! If you’re an investor with a long-term strategy, focused on retirement decades down the road instead of short-term gains by the end of the year, you often can ignore these day-to-day gyrations in the market if you invest wisely.
By picking bulletproof mutual funds that will deliver a steady trickle of profits into your 401(k), you will ensure a safe retirement years from now no matter what horrible headlines might pop up in the short term and send Wall Street scurrying.
If you don’t have these funds in your 401(k) plan, don’t fear – if you are no longer with your previous employer you can “roll over” your cash into an IRA account with greater flexibility. You have a wider selection of mutual funds if you make the move to rollover your IRA, so these picks could be up for grabs.
Here are five such bulletproof funds for your 401(k) plan or IRA retirement account:
Fidelity Capital & Income Fund
The Fidelity Capital & Income Fund (MUTF:FAGIX) is the poster child for low-risk mutual fund investments. It has scale, with assets of nearly $10 billion under management. It has the coveted five-star rating from Morningstar, one of the most respected mutual fund ratings firms in the world. And it also boasts a yield of 5.9% at current writing — ensuring a steady stream of profits from its bond holdings.
There assuredly are risks to Fidelity Capital & Income, notably because about 17% of its holdings include foreign bonds. Sovereign debt woes are indeed a problem in the short term. There also are a few high-yield bonds from less-than-stellar corporations with “junk” bond ratings.
However, more than 80% of the fund is in U.S. corporate bonds — including debt from reliable names like telecom Sprint Nextel (NYSE:S) and General Motors (NYSE:GM) financing arm GMCA — that have “investment grade” ratings above B grade.
So while there are a few slightly risky assets that could deliver nice returns, the vast majority of holdings are bulletproof corporates that will ensure slow and steady returns for your 401(k) or IRA.
How bulletproof? Well, the 10-year return on this fund is over 11% annually. That means $10,000 invested a decade ago would have turned into over $27,000 by now! The shorter-term five-year return also is impressive at nearly 8% annually.