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3 Good Funds Having a Great Year

3 Good Funds Having a Great Year

Good downside protection is an underrated quality in a bull market, but boy is it a lifesaver in a bear market. Today, I’ll highlight three funds producing strong performance by losing less than their peers. These are the sort of funds that help you stay invested through tough times. If you give up in a bear market, you’ll substantially reduce your long-term returns. 3 Good Funds Having a Great Year These funds earn either a Morningstar Analyst Rating of Bronze or Gold.

  1. Vanguard Short-Term Inflation Protected Securities VTAPX
  2. FPA New Income FPNIX
  3. Fidelity Intermediate Bond FTHRX

Vanguard Short-Term Inflation Protected Securities is down just 1.3% year to date, making it one of the top-performing TIPS funds. This Gold-rated fund has the benefit of low costs, which always help in down markets, or up markets. But the big reason for its performance is it has less interest-rate risk than its peers. Yes, TIPS have inflation protection, but they don't have protection against rising rates. That's why a short-term TIPS fund like this one is holding up so well.

Bronze-rated FPA New Income is all about defense. The fund is wary of credit risk and interest-rate risk and thus consistently has a low-risk profile. Its 3% loss for the year is smaller than 90% of short-term bond funds.

Finally, Fidelity Intermediate Bond's absolute loss of 8% for the year to date sounds grim, but that's actually in the top 5% of intermediate-bond funds. That shows just how bad things have been in that category. The category on average is down 11.5% for the year as credit problems and rising rates have been a double whammy on a group that usually produces pretty solid, boring returns. Rob Galusza has some tight guardrails on credit and interest-rate risk that keep the fund out of trouble. The fund now boasts solid risk-adjusted returns over Galusza's tenure.

For more from Russ Kinnel, watch "3 Good Under-the-Radar Dividend Stock Funds."

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Russel Kinnel

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Russel Kinnel is director of ratings, manager research, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He heads the North American Medalist Rating Committee, which vets the Morningstar Medalist Rating™ for funds. He is the editor of Morningstar FundInvestor, a monthly newsletter, and has published a number of prominent studies of the fund industry covering subjects such as manager investment, expenses, and investor returns.

Since joining Morningstar in 1994, Kinnel has analyzed virtually every type of fund and has covered the most prominent fund families, including Fidelity, T. Rowe Price, and Vanguard. He has led studies on the predictive power of fund data and helped develop the Morningstar Rating for funds and the Morningstar Style Box methodology. He was co-author of the company's first book, Morningstar Guide to Mutual Funds: 5-Star Strategies for Success (Wiley, 2003), and was author of the book Fund Spy: Morningstar's Inside Secrets to Selecting Mutual Funds That Outperform, published in 2009.

Kinnel holds a bachelor's degree in economics and journalism from the University of Wisconsin.

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