A Sampling Menu of Core Funds, Supporting Players

Just as one might think of a Thanksgiving feast as a combination of core items (turkey, stuffing) and supporting players (cranberry sauce, pumpkin pie), one strategy for building a portfolio involves balancing core investments and complementary ones. A simple, low-cost S&P 500 index fund may offer a great foundation, but it misses the diversifying properties and potential outsized returns of small-cap and foreign-domiciled stocks, not to mention the ballast of bonds. Likewise, a portfolio dominated by emerging-markets stock funds might give you a sugar high when the category is doing well but a severe case of heartburn when it drops.

To mark the Thanksgiving holiday and provide some food for thought on the importance of a well-rounded fund diet, we've put together the following sampling menu of topnotch funds that fill core or supporting roles in a portfolio. Using Morningstar's  Premium Fund Screener tool, we searched on funds from various categories and applied the "Role in Portfolio" screen. We stuck with those rated Bronze or better by Morningstar analysts to ensure they've been vetted for quality. We also limited our search to noninstitutional funds that are open to new investors to identify those with the broadest appeal.   

Many solid funds passed our screen; the following are just a few if them. Premium users can use the Fund Screener to assemble their own menus, seasoned to taste.

Main Courses (Core Funds)

Domestic Stock
 T. Rowe Price Blue Chip Growth (TRBCX)
As the name implies, this large-growth fund focuses on quality companies with consistent earnings and free cash flow growth. Along with blue-chip stocks, the fund mixes in a crop of up-and-coming names. Run by a veteran manager backed by a strong analyst team, the fund has been a consistent outperformer, amassing top one-third percentile returns for the category during the trailing three-, five-, 10-, and 15-year time periods. At 77 basis points, fees are below-average for a large-cap, no-load fund.

Foreign Stock
 Vanguard Total International Stock Index (VGTSX)
For those who prefer a passive investing approach, this low-cost index fund (0.22% expense ratio for the investor share class) currently tracks the MSCI All Country World ex-USA Investible Market Index, a cap-weighted benchmark of foreign stocks. For international diversification, this fund is tough to beat; it holds thousands of companies in dozens of countries. And on a long-term performance basis it's tough to beat, as well, gaining an average of 8.6% annually during the past 10 years versus 7.0% yearly for the foreign large-blend category. The fund's 23% stake in emerging markets (as of Oct. 31 and according to Vanguard's website) is well above the category average, making the fund more volatile than its peers. Investors should note that Vanguard recently announced an upcoming switch of benchmarks for this fund to the FTSE Global All Cap ex-U.S. index, which might result in adjustments to its allocations.

Bonds
 Fidelity Total Bond (FTBFX)
This actively managed intermediate-term bond fund primarily holds investment-grade issues but can also invest up to 20% of its portfolio in a mix of high-yield and emerging-markets bonds. Its managers, backed by Fidelity's formidable research team, aim to outperform by identifying relatively underpriced market and yield-curve sectors and through security selection. The fund's annualized returns have placed it at or near the top quartile of the category during the trailing three-, five-, and 10-year periods. Fees (0.45%) are low for an intermediate-term, no-load bond fund.

Side Dishes (Supporting Players)

Commodity
 PIMCO CommoditiesPLUS Strategy (PCLAX)
Investors looking for a dash of commodities exposure for their portfolios might consider this load fund (5.5%), which invests in a basket of derivatives as a way to replicate a diversified commodities index. Collateral for the derivatives is invested in a portfolio of short-term bonds. The fund's management team may stray from index weightings slightly if it sees opportunities.

High-Yield Bond
 Fidelity High Income (SPHIX)
This fund's veteran manager emphasizes bond-picking in search of mispriced debt from companies that can improve their credit profiles within a few years. B rated issues are an area of focus, accounting for about half the portfolio as of July 31. The fund's moderate profile belies the fact that it will occasionally venture into lower-rated fare if opportunities present themselves. Expenses are below-average (76 basis points) for a high-yield, no-load bond fund.

Alternative
 Wasatch Long/Short
This long-short equity fund aims to capitalize on the market's downside and upside while reducing volatility. It takes long positions on companies its management team believes are undervalued and short positions on those it believes are due for a near-term decline. The fund is usually invested about 50%-60% long and 20%-30% short. Large cash positions (34% of assets as of Sept. 30) are not unusual. The fund has done a good job of keeping pace with the market during rallies--a challenge for long-short funds--and has produced above-average risk-adjusted returns since its 2003 inception. At 1.3%, annual expenses are below-average for a long-short/market-neutral, no-load fund.

Performance data as of Nov. 19.