3 Low-Risk Mutual Funds With High Returns

Advertisement

Can you name any mutual funds that have beat the S&P 500 Index over the past 10 years? I’m sure you wouldn’t need to think long to find one that has accomplished this feat.

easy-money-road-signBut try naming three mutual funds that performed like a stock index in the past decade — while doing so with a lower relative risk and a balanced portfolio.

You’d need to do some serious research to come up with those names … if we didn’t already do it for you!

We set out to find mutual funds with a balance of stocks, bonds and cash that put up annualized returns competitive with the 8% earned on average by the S&P 500 Index (which is 100% stocks) over the past 10 years.

Low-Risk Mutual Funds – Bruce Fund (BRUFX)

Low-Risk Mutual Funds - Bruce Fund (BRUFX)The Bruce Fund (BRUFX) sounds like an idea from the guy three cubicles down from you than a legitimate mutual fund. But almighty Bruce — which is named for its management team of more than 30 years, Jeffrey Bruce and Robert Bruce — has an impressive 10-year annualized return of 10.8%.

As you might imagine, those gains don’t come without at least some risk — but certainly lower risk than a portfolio of 100% stocks. The fund recently had an allocation of just around 45% stocks, most of which consists of mid- and small-cap companies including Amerco (UHAL), Mannkind (MNKD) and Flotek (FTK). For the bond allocation (17%), it uses a combination of zero-coupon bonds and junk bonds.

This risk can make for some significant declines (the fund shed 27.8% in the midst of the last bear market in 2008) but the lows are not as low as that of stocks (the S&P 500 declined 37% in 2008). Therefore, BRUFX comes out on top of our list of mutual funds with below-average risk and above-average returns.

The initial purchase minimum for BRUFX is just $1,000, and Bruce’s expense ratio is a fair 0.7%.

Low-Risk Mutual Funds – Franklin Income A Shares (FKINX)

Low-Risk Mutual Funds - Franklin Income A Shares (FKINX)Franklin Income A Shares (FKINX) boast a 10-year return of 7.7%, which is just a hair below that of the S&P 500’s 8.0% return, but it accomplishes this stock-like performance with a conservative mix of value stocks, high- and low-credit-quality bonds, and convertible securities.

Not only is there attractive capital appreciation, but income-minded investors will appreciate FKINX’s current yield of 3.5%. That comes thanks to high-yielding top holdings such as Royal Dutch Shell (RDS.A), BP (BP) and Merck & Co. (MRK).

The caution that comes along with balanced funds that achieve above-average long-term returns like this is that they also can suffer significant short-term declines; FKINX fell 30.5% at the worst of the bear market in 2008.

But with proper perspective, the strong capital appreciation and generous income qualities make for a rare combination in a mutual fund.

FKINX has a low expense ratio of 0.62%, though it does charge a maximum front load of 4.25%. That charge may be lowered depending on your purchasing amount. Minimum purchase to enter FKINX is $1,000.

Low-Risk Mutual Funds – Berwyn Income Fund (BERIX)

Low-Risk Mutual Funds - Berwyn Income Fund (BERIX)Berwyn Income Fund (BERIX) is the most conservative of our list with an allocation to common stock that does not exceed 30% of the portfolio, as well as a balance of investment-grade bonds, high-yield bonds, convertible bonds and cash.

The 10-year annualized return is 7.8%, and its worst year in the past decade was in 2008 when it only declined 10.2%, which is nearly 27% better than the S&P 500. As with all the mutual funds in our list with high returns and below-average risk attributes, losing less in down markets is just as important as gaining more in up markets

Income investors also will enjoy the reasonable 2.2% yield for BERIX and expense ratio of only 0.63%. The minimum purchase is $3,000.

As of this writing, Kent Thune did not hold a position in any of the aforementioned securities. Under no circumstances does this information represent a recommendation to buy or sell securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/09/top-3-low-risk-mutual-funds-high-returns/.

©2024 InvestorPlace Media, LLC