Looking for a new fund in a year when the Standard & Poor's 500 has soared more than 20% can be a bit like trying to beat your old speed record on Pallbearer's Peak after a night of drinking at the ski lodge. Sometimes it's better to look for a safer route.
With that in mind, there are plenty of funds that didn't beat the blue-chip index that might be worth a look in 2018. These funds may have lagged because their style was out of favor, or because their entire asset class was out of favor. Nevertheless, they have performed well against their peers — and could shine in the new year.
Dodge & Cox Stock (DODGX). This large-company blend fund has been looking for growth at a reasonable price since 1965, and it generally finds it. The team-managed fund gained 19% this year, but remains in the top 25% of its peers. The $69.9 billion fund won't keep you entirely out of trouble — it lost 43.3% in 2008 versus 37% for the S&P 500 — but it's a consistent performer over time.
Invesco Small Cap Value (VSCAX). The big laggards of 2017 were small-cap value funds, which gained 9.3%. While the fund has logged occasional off years, as in 2015, its long-term record against its peers is remarkable. If you're looking for a good fund in an out-of-favor space, this would be a good one to consider.
Fidelity Low-Priced Stock (FLPSX). One reason
this fund is out of favor: Low-priced stocks are harder to come by after a nine-year bull market, even though the fund defines "low price" as "less than $35 per share." But the strategy is a good one. No company likes to have a low-priced stock, and it's easier to get a big gain on a $10 stock than a $500 one. If you're looking for a fund that will probably do well after a correction, it's a good choice: The fund carries more than 10% in cash and jumped 39% in 2009 versus 26% for the S&P 500.
AQR Long-Short Equity Fund (QLEIX). By and large, long-short funds have been a disappointment this year, rising an average 11.6%. One reason: Betting against most stocks has been a disappointment.
AQR's 16.1% gain this year is impressive, as is its low correlation to the S&P 500.
Loomis Sayles Fixed Income (LSFIX) or DoubleLine Selective Credit Fund (DBSCX). Both of these go-anywhere bond funds have a lot going for them, starting with their 2017 records. The Loomis Sayles offering gained 8.4% this year in a generally miserable fixed-income environment, while the DoubleLine fund gained 8.6%. Both have a laser focus on credit quality, and both are run by formidable managers: Dan Fuss for
Loomis and Jeffrey Gundlach for DoubleLine. Mr. Fuss, with 59 years in the industry, has the edge on experience. DoubleLine has the lower expenses — and, of course,
Mr. Gundlach.
