By Karen DeMasters
Each financial advisor who manages mutual funds for his clients has a favorite or two that fulfills a specific goal in their clients' portfolios. Financial Advisor magazine recently asked several advisors to reveal their favorites. The advisors, who report they are satisfied with the expenses compared to the returns, have been using some of the funds for many years.
Bob Mecca, CFP, of Robert A. Mecca & Associates LLC in Hoffman Estates, Ill., wants funds that have a relatively low risk as measured by beta and other factors, do not mirror indexes, have historically outpaced the competition and have been in the top quartile of mutual funds for a period of time. Mecca publishes a weekly e-mail commentary called Mecca on Money.
Mecca says he likes low-risk funds, especially in the current market environment, and he wants ones where the fund and the manager have been around for a long period of time.
One of his favorites is the Vanguard Wellesley Balanced Fund, which is comprised of about 60% bonds and 40% stocks. Since its inception, the fund has done relatively well with low risk. It invests mostly in large-cap value companies.
At the same time, Mecca notes that he has all types of clients and not all funds are appropriate for everyone. He has his special 'Mecca 40' funds, which have historically outpaced index funds with relatively low risk.
David Loesser, CFP and president of The Estate Planning Group in Washington's Crossing, Pa., has three favorite funds he feels make a good mix in his clients' portfolios.
Doubleline Total Return Bond Fund is a relatively new fund but the manager, Jeffrey Gundach, has been around for a long time and Loesser likes his track record.
"We like it because it has low standard deviation and little volatility. It is conservative, so it's excellent for a core holding in a retirement portfolio," he says.
Templeton Global Bond Fund, managed by Michael Hasenstab, is another that Loesser likes for its diversifying value. It holds debt in foreign countries and has a low correlation to the stock market, he says.
Finally, MFS Emerging Market Debt Fund is good because it uses bonds from emerging markets and is still moderately correlated to the S&P 500, Loesser says.
Different mutual funds have different purposes, and Lili Vasileff, CFP, registered investment advisor and founder of Divorce and Money Matters in Greenwich, Conn., says she judges funds by their performance relative to their peers and relative to the stock market.