President Donald Trump is nearing his 100th day in office, but whether we’re on day 97, 107 or 407, the search for the best mutual funds during his term requires a big-picture view on the market and business cycle, rather than a focus on politics.
Yes, Trump can move markets in the short-term just by tweeting about trade relations or tax reform, but in the long-term, you’d be amazed at how little actual impact presidents have on stock and bond prices.
It’s certainly less than the talking heads would have you believe.
Stock prices are at record highs now and appear to have momentum, but Trump’s entry into the White House isn’t the best of timing, in terms of market cycles. Within his first 100 days, the bull market reached the ripe old age of eight years, and rising interest rates mark the mature phase of the business cycle. Therefore it is wise to expect a bear market sometime before 2020, when Trump’s first term in office comes to a close.
With that backdrop, here are three of the best mutual funds to hold for the rest of Donald Trump’s term:
Dodge & Cox Stock (DODGX)
Expenses: 0.52%, or $52 annually for every $10,000 invested
Minimum Initial Investment: $2,500
Funds that hold high-quality stocks will be smart holdings during Trump’s term, and Dodge & Cox Stock (MUTF:DODGX) is one of the best mutual funds on the market to get the job done.
Like most of the great value stock investors, the seasoned management team for DODGX looks for stocks that appear to be undervalued by the market but also have long-term growth potential. A secondary objective is to seek stocks that provide income.
This dual objective often results in a portfolio that leans toward big financials like top holdings Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), and Charles Schwab Corp (NYSE:SCHW). Rising interest rates tend to favor big financial companies, which have already seen big gains during the Trump administration.
Hussman Strategic Total Return (HSTRX)
Minimum Initial Investment: $1,000
Hedging against inflation and minimizing market risk are two challenges investors will face during Trump’s presidential term and Hussman Strategic Total Return (MUTF:HSTRX) is one of the best mutual funds to meet this challenge.
HSTRX invests primarily in fixed income securities, but John Hussman will at times implement a hedge fund-like style, which will have him shift some assets to cash and commodities to protect against downside risk.
The defensive nature of HSTRX will typically have it underperform category peers during bull markets, but this fund can produce positive returns in bear markets, as occurred during the deep downturn of 2008.
Vanguard Balanced Index (VBINX)
Minimum Initial Investment: $3,000
Smart investors know that the best strategy for investing beyond the short term can be met by a low-cost, well-balanced mutual fund like Vanguard Balanced Index (MUTF:VBINX).
There’s no telling when the next bear market will hit, but it’s almost certain to come during Trump’s first term, which will end at the close of 2020. This means a moderate portfolio of stocks and bonds could very well outperform a portfolio of 100% stocks during that period.
The VBINX portfolio consists of approximately 60% stocks and 40% bonds. The equity portion is primarily quality large-caps like Apple Inc. (NASDAQ:AAPL), Alphabet Inc (NASDAQ:GOOGL) and Microsoft Corporation (NASDAQ:MSFT), and the fixed-income side consists primarily of high-quality, intermediate-term bonds.
The fact that VBINX is passively managed also removes manager risk, which can plague actively-managed funds when managers make poor timing decisions in transitional market environments — one that is almost certain to arise during Trump’s term in The White House.
As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities, although he holds VBINX in some client accounts. His No. 1 holding is his privately held investment advisory firm. Under no circumstances does this information represent a recommendation to buy or sell securities.