These Funds Make Great Side Dishes
Here are some offerings that can spice up your portfolio.
Although the turkey is the undisputed star of most Thanksgiving meals, this holiday is rarely just a one-dish affair. A hearty feast consists of a turkey flanked by its numerous complementary side dishes; few would have their Thanksgiving meal any other way.
Constructing a well-balanced portfolio isn't all that much different from assembling a Thanksgiving spread. While core holdings provide most of a portfolio's nutritional value, supplementary holdings can add spice and diversification to a well-rounded portfolio.
Using our Premium Fund Screener, we applied a series of exacting criteria to call up a menu of worthwhile side-dish funds--offerings that our analysts believe can fulfill a valuable role in a portfolio but are secondary to the core. We first limited our search to Analyst Picks--funds that our analysts tag as favorites. And to further streamline the results, we screened on distinct portfolios of funds with minimum initial investment requirements of less than $10,000. On the fees front, we eliminated load funds with fees greater than the category average. Finally, we required that managers of supporting players have at least a decade's worth of experience under their belts. The screener yielded 11 funds, three of which we highlight below. Premium members can run the screen by clicking here.
Brown Capital Management Small Company (BCSIX)
For exposure to the small-cap space, this fund merits investor consideration. The seasoned management team helming this fund seeks companies with sustainable competitive advantages and holds them for the long haul, as evidenced by its microscopic turnover. Investors should note that this fund holds large positions in the more volatile technology and health-care sectors, which has led to periodic bouts of underperformance. But by stomaching some streaky short-term returns, patient investors have been rewarded in the long run.
T. Rowe Price Short-Term Bond (PRWBX)
Although intermediate-term bond funds usually form the core of most investors' fixed-income portfolios, this offering is a sturdy option for short-term assets. It boasts an experienced manager in Ted Wiese, who in turn is backed by a vigilant, forward-looking analyst team. The team was early to sound alarm bells over the impending credit crisis, and such foresight has helped the fund navigate market calamities relatively unscathed. Wiese keeps the portfolio's average credit quality at AA, though he won't shy away from holding a sizable chunk of BBB rated corporate issues or a small stake in unhedged international bonds. But he avoids making major interest-rate bets and limits the fund's duration to roughly two years. Investors who are looking for a low-volatility bond fund with a competitive long-term record and great downside protection to boot have a lot to like in this fund.
Vanguard Convertible Securities (VCVSX)
This fund reopened its doors in May to help offset the major outflows it experienced since October 2009. Manager Larry Keele invests primarily in convertible bonds, while avoiding equitylike convertibles and convertible preferreds. Due to Keele's valuation- and credit-consciousness, the fund has remained at the top of its category and has never trailed the Bank of America Merrill Lynch All Convertibles All Qualities Index in any rolling 10-year period since Keele has stood behind the helm. Using what Morningstar analyst Dan Culloton calls a "cautious yet opportunistic approach," Keele has earned this fund a spot as one of the best funds in its category.
Esther Pak does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.