5 Top Funds For 2014

12/16/2013


It's been a good year for our two recommended fund portfolios. Through Dec. 10, the Growth Portfolio is up 25.8%, versus 24.5% for its passive benchmark portfolio. The Conservative Portfolio has gained 22.9%, compared to an increase of 17.2% for its benchmark.

FUND PORTFOLIOS POST SOLID GAINS
------------------------------------ Total Returns ------------------------------------
Annualized
------ Since Start Of ------
2009
(%)
2010
(%)
2011
(%)
2012
(%)
YTD
(%)
2004
(%)
2009
(%)
2011
(%)
Growth Portfolio
32.8
18.2
(3.0)
15.3
25.8
8.3
17.4
12.3
Benchmark
27.5
13.6
(2.1)
16.2
24.5
7.4
15.6
12.5
Conservative Portfolio
25.3
16.0
(0.8)
14.1
22.9
7.9
15.3
11.9
Benchmark
22.0
11.3
(0.2)
13.3
17.2
7.0
12.6
10.0
S&P 500 Index
26.5
15.1
2.1
16.0
29.0
7.2
17.5
15.5
MSCI EAFE Index
(Int'l Stks.)
31.8
7.8
(12.1)
17.3
18.8
6.6
11.8
7.1
Barclays
Aggregate Bond
5.9
6.5
7.8
4.2
(1.6)
4.6
4.6
3.5
Returns through
Dec. 10.

The strong results aren't a fluke. Our Growth and Conservative portfolios have topped their benchmarks over the last five and 10 years.

What's our secret? Rather than chase short-term performance, we focus on consistent winners with low expense ratios and moderate portfolio turnover. Case in point: 19 of our 22 recommended funds have outperformed their peer groups over the last three and five years. And all but two have expense ratios below category averages. Funds with moderate turnover — the rate they buy and sell securities — tend to have lower trading costs and fewer short-term taxable gains. Below we profile five top picks.

Artisan International ($30; ARTIX), which invests in mostly large-cap foreign stocks, is up 21.9% this year, versus 15.9% for its peer group. Its managers focus on high-quality companies with sustainable competitive advantages. Europe represents 66% of the portfolio.


T. Rowe Price New Horizons ($48; PRNHX) is a standout in the small-cap growth category — the fund ranks among the top 2% of its peer group for three- , five- , and 10-year returns. Up 43.2% this year, the fund has benefited from outsized weightings in consumer and technology stocks.


T. Rowe Price Value ($35; TRVLX), which focuses on large-cap value stocks, is up 34% in 2013, outstripping its peer-group return of 28%. The fund, which holds nearly 120 stocks, has a 20% weighting in health care and a 22% stake in financials.


Yielding 3.3%, Thompson Bond ($12; THOPX) holds mostly high-quality corporate bonds. John Thompson has been at the helm since 1992. The fund ranks among the top 2% of short-term bond funds for one- , three- , five- , 10- , and 15-year performance.


Wells Fargo Advantage Discovery ($32; STDIX), a top midcap growth fund, is up 36.8% this year, topping the category return of 30.5%. Nearly 30% of the fund is invested in small and microcap stocks. The fund ranks among the top 10% of its peer group for one- , three- , five- , and 10-year returns.

OUR RECOMMENDED MUTUAL FUNDS
Year-To-Date *
--- % Of Portfolio ---
 
Fund (Price; Ticker)
Return
(%)
Rank
Conser-
vative
(%)
Growth
(%)
Fund
Rating †
Artisan International ($30; ARTIX)
21.9
A
9
9
98
Dreyfus Midcap Index ($37; PESPX)
29.3
C
0
0
57
Dreyfus Small Cap Stock Index
($30; DISSX)
35.7
B
0
0
90
Fidelity High Income ($9; SPHIX)
6.4
C
5
4
56
Homestead Small Company
($36; HSCSX)
31.1
D
5
8
97
PIMCO Total Return ETF
($105; BOND)
(0.8)
A
6
0
NA
T. Rowe Price New Horizons
($48; PRNHX)
43.2
A
9
9
98
T. Rowe Price Value
($35; TRVLX)
34.0
A
8
9
96
Thompson Bond ($12; THOPX)
2.9
A
6
0
97
Vanguard 500 Index ($167; VFINX)
28.8
C
6
7
73
Vanguard Dividend Growth
($21; VDIGX)
28.2
C
12
12
85
Vanguard GNMA ($11; VFIIX)
(1.6)
B
0
0
93
Vanguard Growth Index
($47; VIGRX)
28.0
D
11
11
79
Vanguard Inter.-Term Tax-Exempt
($14; VWITX)
(1.6)
B
0
0
77
Vanguard Selected Value
($29; VASVX)
38.3
A
5
7
100
Vanguard Short-Term Invest.-Grade
($11; VFSTX)
1.2
B
0
0
86
Vanguard Total Bond Mkt. Index
($11; VBMFX)
(1.8)
D
0
0
33
Vanguard Total Int'l Stock Index
($16; VGTSX)
12.1
E
0
0
32
Vanguard Wellesley Income
($26; VWINX)
8.4
B
0
0
95
Vanguard Wellington ($39; VWELX)
17.8
A
6
9
92
Wasatch International Growth
($29; WAIGX)
23.3
C
7
8
94
Wells Fargo Advantage Discovery
($32; STDIX)
36.8
A
5
7
94

* Year-to-date ranks through Dec. 10 from Morningstar, comparing performance among funds with same objectives. A = top 20%; B = next 20%; C= middle 20%; D = next 20%; E = bottom 20%.
† Fund ratings are percentile ranks based on our fund-rating system.


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