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This Low-Cost Fund Stays Afloat in Sinking Markets

Silver-rated ClearBridge Appreciation has one of the better risk/reward profiles in its category, says Morningstar's Andrew Daniels.


Silver-rated ClearBridge Appreciation is a great fund for cautious investors. It has many positive attributes, including a strong record of downside protection, a duo of experienced managers, and below-average fees. 

Comanagers Scott Glasser and Michael Kagan strive to achieve returns that modestly beat the S&P 500's with significantly less risk. The managers want to own stocks where the potential upside outweighs the potential downside by a ratio of 3 to 1. The portfolio consists primarily of large-cap stocks with dominant market positions, healthy balance sheets, and proven management teams. The fund is well-diversified across sectors and industries, underscoring the team’s focus on adding value mainly through stock selection. 

The managers have a long-term investment horizon, and some of the fund’s largest holdings, such as Microsoft, Disney, and Johnson & Johnson, have been in the portfolio since as early as 1986. This cautious and patient approach helps the fund hold up well in down markets such as during the financial crisis and more recently since the S&P 500 peaked in May 2015. 

On the flipside, it tends to lag in risk-fueled rallies, as has been the case since the market bottomed in March 2009. Still, this fund has one of the better risk/reward profiles in the large-blend Morningstar Category, and is poised to outperform over a full market cycle.

Andrew Daniels does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.