All of the major market indices have seen at least one negative year in the past decade but there are dozens of mutual funds that have been positive in all 10 previous calendar years.
We’re going to highlight seven of the best funds that have pulled off this rare feat since 2005 and are still positive year-to-date 2015, when stocks and bonds are both struggling to stay positive.
Racking up ten-plus years of positive gains is not as easy as it may sound, not even for bond funds. As you might guess, stocks had at least one big negative year in the previous ten, as measured by 2008’s steep decline of 37% on the S&P 500 Index. Year-to-date, the S&P 500 is down 2%.
Bonds, as measured by the Barclays Aggregate Bond Index, declined 2% in 2013 and are sitting on a 0.6% loss year-to-date.
With that backdrop, I give you the best mutual funds that put up positive returns in the previous 10 calendar years and so far in 2015.
Best Funds on a 10-Year Winning Streak: TCW Total Return Bond (TGMNX)
Expenses: 0.77%, or $77 annually per $10,000 invested
Minimum Investment: $2,000
When making a case for investing in actively managed bond funds, be sure to include TCW Total Return Bond (TGMNX) in your argument.
In 2013, the most recent year when bonds were negative, TGMNX put up a gain of 1.4%, which compares to -2% for the Barclays Aggregate Bond Index. And in 2008, when stocks, as measured by the S&P 500 index fell 37%, TGMNX gained 0.9%.
And the five-star rated fund can also put up big returns in years when bonds are doing well. This combination of winning returns and not losing when performance matters most makes for solid long-term returns. The 10-year annualized return for TGMNX is 6.7%, which looks much more like a stock fund than a bond fund.
How does TGMNX get such good results? Other than having experienced management, the portfolio assets are largely mortgage-backed securities, which have done well since the credit crisis of 2007-2008.
Best Funds on a 10-Year Winning Streak: Dreyfus/Standish Global Fixed Income (SDGIX)
Expenses: 0.59%
Minimum Investment: $1,000
If you want to stand a chance of getting a long string of positive returns, a fund like Dreyfus/Standish Global Fixed Income (SDGIX), that can go anywhere in the world, can be a smart choice.
At the helm of SDGIX for nine of the past 10 years, manager David C. Leduc has not only avoided even one single losing year, but the 10-year annualized return of 6% stands tall compared to the Barclays Aggregate Bond Index return of 4.7%.
Year-to-date the fund is just positive at 0.12% but still impresses compared to -2.3% for the average global bond fund.
The portfolio is a textbook case for diversification with a broad mix of bonds of various credit quality, spread across US Treasuries, corporate bonds, mortgage-backed securities, and foreign bonds.
Best Funds on a 10-Year Winning Streak: Janus Flexible Bond (JDFNX)
Expenses: 0.44%
Minimum Investment: $0
Investors fortunate enough to have the qualified access to buy shares of Janus Flexible Bond (JDFNX) have seen a decade of positive returns and then some.
JDFNX can only be purchased through a handful of investment companies, primarily ones like Fidelity Institutional FundsNetwork and Schwab Retirement Only, that offer the fund to their institutional and 401(k) clients.
Co-managers R. Gibson Smith and Darrell W. Waters have been at the helm of Janus Flexible Income since May of 2007, which gives them credit for eight of the past 10 years’ performance. The multisector objective for the fund allows the management team to go anywhere in the bond market to find bond holdings for the portfolio.
The 10-year annualized return of 5.8% ranks ahead of 96% of category peers.
Fir investors not qualified to buy JDFNX but wanting to tap into the fund’s success, although at a slightly higher expense ratio that shaves off performance, there is Janus Flexible Bond (JAFIX), which is the fund’s T-share class.
Best Funds on a 10-Year Winning Streak: Colorado BondShares Tax-Exempt (HICOX)
Expenses: 0.70%, 4.75% front load
Minimum Investment: $500
Very few municipal bond funds can boast of a 10-year-plus streak of positive returns, and Colorado BondShares Tax-Exempt (HICOX) is the best of this short list.
As with our other best funds with positive 10-year histories, HICOX benefits from long-term manager tenure. Fred R. Kelly Jr. has been at the helm of the portfolio for over 25 years, and his experience shows positive results in the performance.
The 10-year annualized return of 4.5% outranks 99% of all other single-state municipal bond funds. Going out further, to the 15-year return of 5.2%, HICOX beats 97% of category peers.
The 4.75% front-load for HICOX is a bit of an expense hurdle to overcome, but the tax benefits, especially to Colorado state residents, help overcome the added expense.
Best Funds on a 10-Year Winning Streak: Ave Maria Bond (AVEFX)
Expenses: 0.54%
Minimum Investment: $2,500
Among the best funds with a decade-long winning streak is one that invests in bonds that are in alignment with the fund company’s religious values and that fund is Ave Maria Bond (AVEFX).
AVEFX invests primarily in bonds that do not violate the core values and teachings of the Roman Catholic Church. The portfolio consists of U.S. Treasury bonds, agency securities and investment-grade bonds of U.S. corporations.
As for performance, the greatest strength of AVEFX is its ability to win while other bond funds are losing. For example, the only year in the past decade when bonds had a negative year was 2013, when the Barclays Aggregate Bond Index fell 2%. However the Ave Maria Bond fund jumped 6.1%, beating 99% of intermediate-term bond funds.
Although AVEFX tends to underperform in years when most bond funds put up gains, the play-not-to-lose style and the Catholic values objective is a winning combination for the fund.
Best Funds on a 10-Year Winning Streak: BlackRock Allocation Target Shares (BRASX)
Expenses: None
Minimum Investment: $0
Investors who buy funds through a broker may want to take a look at BlackRock Allocation Target Shares (BRASX).
Offered through separately managed accounts at brokerage firms like Merrill Lynch, JPMorgan (JPM) and Charles Schwab (SCHW), BRASX primarily invests in U.S. corporate bonds with a wide range of durations and credit quality. The fund can also invest in collateralized mortgage obligations, derivatives and cash equivalents.
Prospective investors of BRASX may be attracted to the 10-year-plus positive return winning streak for the fund, but long-term performance has dragged behind category peers. Therefore, reasons for buying shares include stability of return, income and preservation of assets.
Best Funds on a 10-Year Winning Streak: Weitz Short-Intermediate Income Investor (WSHNX)
Expenses: 0.84%
Minimum Investment: $2,500
We end our list of best mutual funds without a single losing year in a decade with a fund, Weitz Short-Intermediate Income Investor (WSHNX), that is not only open to investors outside of a brokerage firm but one that may prove to be a smart fixed-income choice over the next 10 years.
You may have noticed that most of the funds on our list are either go-anywhere bond funds or funds with limited access to investors. When interest rates start rising again, which they haven’t done for nearly nine of the past 10 years, the next decade will likely break the positive winning streaks of most of these funds.
However, the short-to-intermediate-term objective for WSHNX may support positive returns even in the coming interest rate environment. This is because bonds of shorter duration are not as interest-rate sensitive as those of longer duration.
Also, a risk-off sentiment for bond investors will likely put downward pressure on high-yield bonds.
With that said, investors in funds like WSHNX should not expect high returns or high yields, but if it is preservation that is sought, this fund is a solid choice.
As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities. His No. 1 holding is his privately held investment advisory firm in Hilton Head Island, SC. Under no circumstances does this information represent a recommendation to buy or sell securities.
