PIMCO Total Return
Speaking of bond funds, you will be hard-pressed to find a more respected fund than the PIMCO Total Return Fund (MUTF:PTTRX). Managed by legendary bond trader Bill Gross, PIMCO has become synonymous with profitable investing in bonds, whether they be from the Treasury or foreign governments or convertible bonds.
Bill Gross got a bad rap at the beginning of 2011 because he underperformed the market for what seemed like the first time in history. His fund returned only 4.2% in 2011, which was at the bottom third of its peers.
But in the long run, it’s difficult to find anyone who can match his performance. Gross still has one of the best long-term track records in the bond business even after last year’s hiccup.
Just look at these recent stats from Morningstar showing his average annual return:
- Over the past three years: 8.4%
- Over the past five years: 7.4%
- Over the past 10 years: 6.3%
- Over the past 15 years: 6.8%
Even all-stars strike out once in a while, and long-term investors should be reluctant to give up on the proven success of Bill Gross and PIMCO funds. If you’re looking for a more actively traded fund than this mutual fund, Gross & Co. also have a new exchange-traded PIMCO fund for your IRA — the PIMCO Total Return ETF (NYSE:TRXT).
Vanguard Dividend Growth
Looking for yield but still want to keep a foot planted firmly in stocks, as opposed to bonds? Look no further than Vanguard Dividend Growth (MUTF:VDIGX). This is a large-cap mutual fund with roughly $7.7 billion under management that focuses on long-term capital appreciation of stocks — but also current income via juicy dividends.
Top equity holdings right now include Occidental Petroleum (NYSE:OXY) with its 2.2% yield, PepsiCo (NYSE:PEP) with its 3.2% yield and Johnson & Johnson (NYSE:JNJ) with a 3.5% yield. The average yield is about 2.2% as of this writing — not stellar compared with bonds, but a good income stream.
The real performance of this fund, of course, comes from equity appreciation and not just the payouts from blue-chip holdings. Consider the 10-year return of 5.9% annually and the five-year return of 4.6% annually.
Equally attractive is the rock-bottom 0.34% expense ratio — a bargain fee that is Vanguard’s trademark. According to the management company, this is 70% lower than its peers.
Manager Donald J. Kilbride also is an old hand at Vanguard Dividend Growth. He is the sole manager, and has been with the fund since early 2006. So there are no worries of too many managers muddling the mix with picks, or a new staffer who won’t hold true to the long-term performance of the fund.