Find Strong Supporting Players Here
These growth funds can help diversify your portfolio.
In some recent Five-Star Investor columns, we've used Morningstar's Premium Fund Screener (available on Morningstar.com) to home in on funds that can serve as core holdings because of their focus on well-established companies. This time around, we're shooting for growth funds that Morningstar fund analysts believe should play a limited role in a portfolio because of their maverick nature--in most cases, these funds are volatile and/or invest heavily in smaller-cap stocks. While these funds can prove streaky at times and provide more ups and downs, the most proven ones should serve investors well over the long term.
We set up a number of stringent screens using the Premium Fund Screener to identify these funds. The following criteria were used: U.S. nonspecialty stock funds (only their distinct portfolios, to eliminate multiple share classes) that have been covered by Morningstar fund analysts and deemed supporting players. We also limited the search to funds that reside in the growth (right-hand) side of the Morningstar Style Box and have not been among the most volatile in their category. In order to eliminate funds that focus heavily on small-cap stocks (which would otherwise dominate this list--we wanted funds that were a little more flexible), we selected Stock Portfolio Statistics from the dropdown menu and required the results to have an average market capitalization of at least $2 billion.
Of course, these funds should be proven, too. The Screener was set to isolate funds with managers who have been on board for a minimum of 10 years and have beaten at least two thirds of their category peers over the past three years and at least 75% of them over the past decade (both tumultuous periods for equities). Finally, the funds should be modestly priced and accessible to most investors, so the search was limited to funds with expense ratios below their category average that are open to new investors and require a minimum initial investment of no more than $10,000.
Greg Carlson does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.