Five Core Stock Funds You Don't Have to Babysit

If you're seeking sturdy core stock funds to anchor your portfolio, one quick shortcut is to use our Premium Fund Screener to focus on stock mutual funds that our analysts have designated as both "core" and Analyst Picks.

The core assignment means that a fund is well-diversified and could reasonably serve as an investor's anchor--or only--equity holding. The Analyst Pick designation, meanwhile, lets you know that a fund has been pre-vetted by our analyst team to ensure that it has a sensible strategy, strong management, and good stewardship (including low costs). To run that simple screen, with a few additional criteria thrown in to ensure accessibility for do-it-yourself investors, click here.

Premium Members can also customize their screens to emphasize those factors they deem most important. Because most people have better things to do with their time than stand and watch over their investments, I favor funds that allow you to "set it and forget it."

To help home in on funds that fit the bill, I started by searching the universe of core funds for those with below-average costs and managers who have been on the job for at least five years.

For insurance that a fund would remain in good hands even if the current manager departed, I added a screen for above-average stewardship, meaning the fund family has a history of treating its shareholders as true partners.

Finally, I added a few screens to help ensure that a fund wouldn't stoke investors' worst instincts to buy and sell at inopportune times. I looked for funds with below-average risk scores, because Morningstar's Investor Return data find a notable correlation between volatility and poor dollar-weighted returns.

Because Morningstar's risk rating is a backward-looking measure, I layered on an additional criterion to help identify investments that would also be low-risk in the future--average moat ratings of moderately wide or higher. Morningstar's data have consistently demonstrated that wide-moat stocks and funds tend to hold up better on the downside than narrow- or no-moat companies, a finding that was corroborated during the recent market swoon.

Below, I've provided details on a few funds from my "no babysitter required" list. To see the complete list or customize the screen to fit your own criteria, click here.

Bridgeway Blue Chip 35 Index
Low-cost broad-market index funds are superb "set it and forget it" holdings, providing a lot of diversification in a single shot without the distraction of possible manager and/or strategy shifts. (Index funds can and do shift managers, of course, but it's invariably a non-event.) Owing to its focus on the very largest firms, this fund frequently tops our list when we look for funds with a hefty share of wide-moat companies, and that emphasis has held it in good stead during periods of market weakness. As stocks have struggled over the past three months, for example, it has lost 2 percentage points less than the S&P 500 Index. The fund is more concentrated than a broad market index fund, with just 37 stock holdings as of its most recently available portfolio, but its rule that no more than four stocks can hail from the same industry helps ensure sector diversification. Manager John Montgomery's attention to tax efficiency is another big plus for shareholders in taxable accounts.

PRIMECAP Odyssey Stock (POSKX)
The Primecap management team in charge of this and several other funds, including Vanguard Primecap (VPMCX) and Vanguard Primecap Core (VPCCX), is best known for its contrarian growth approach. The five managers often buy companies with strong growth characteristics when they're in a trough and ride them up as they rebound; the health-care and technology sectors have long been favorite hunting grounds. Of the six funds run by the Primecap team, this offering is the most "core-like," according to analyst David Kathman, with a bigger emphasis on large- and giant-cap stocks than most of its siblings. That, plus its limited reliance on cyclical firms, has helped it hold up well in periods when investors have fretted about the strength of the economy. Even as the S&P 500 has held up better than most actively managed funds over the past three months, this fund has lost even less. It also fared (relatively) well in 2008.

Vanguard Equity-Income (VEIPX)
Vanguard boasts several offerings that fit the core/no-babysitter-required description, including the firm's low-cost index funds as well as active offerings like this one and sibling Vanguard Dividend Growth (VDIGX). Equity-Income's formula is simple: Its managers use both qualitative research and quantitative screens to identify high-quality companies with reasonable valuations, above-average dividend yields, and the prospects of dividend growth. And because of its extra-low costs, shareholders are actually able to take a healthy share of its payout to the bank; it's one of the few active funds with a higher dividend yield than the S&P 500. Its long-term return record and risk profile are impressive, and its Investor Return statistics indicate that shareholders have made good use of the fund.

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