Rainy days and Black Monday always get investors down.
Special strategies are needed to combat the dark clouds that continue to loom over the stock market. The same goes for the bond market, in this period in which low-grade bond values have suffered due to the debt woes of Campeau Corp. and others.All-weather stock and bond funds are designed to provide investor prosperity in sunshine and rain. While they may not produce quite the radiant returns that some other funds enjoy during good times, these funds are less likely to be destroyed by lightning.
"All-weather funds make sense for anyone seeking to avoid the peaks and valleys of investing," said Donald Phillips, editor of Mutual Fund Values investment advisory, which tracks the nation's funds. "They're not high fliers."
Phillips, at the request of this column, compiled a list of the best all-weather stock and bond funds. In the case of the stock funds, none has had a down year in the past 10 years and all feature less-than-average risk. They have portfolio flexibility, in that they can put money in not only stocks but bonds and cash as well.
Best all-weather stock funds, according to Chicago-based Mutual Fund Values, are:
Lindner Fund, Lindner Management Corp., St. Louis; $534 million in assets; no load (no initial sales charge), $2,000 minimum; 21 percent compound annual return over the past 10 years; up 20 percent so far in 1989.
This growth fund likes unloved utilities, natural gas and energy stocks. Three-quarters of portfolio is stocks, the rest cash, bonds and convertible securities.
Neuberger & Berman Partners Fund, Neuberger & Berman Management, New York; $743 million; no load; $1,000 minimum; 19 percent compound annual return over 10 years; up 23 percent in 1989.
It likes underpriced stocks of medium-capitalization companies. Big on industry-sector plays. Three-quarters of portfolio in stocks, the rest cash.
Sogen International Fund, Sogen Securities Corp., New York, $136 million, 3.75 percent load and 0.25 percent annual 12B-1 promotional-costs fee; $1,000 minimum; 20 percent compound annual return over 10 years; up 12 percent in 1989.
Two-thirds of portfolio is in low-priced U.S. stocks, but also holds bonds, gold and foreign company stocks.
American Mutual Fund, American Funds, Los Angeles; $2.95 billion; 5.75 percent load and 0.25 percent annual 12B-1 fee; $250 minimum; 18 percent compound annual return over 10 years; up 22 percent in 1989.
A conservative growth-and-income fund, it likes blue-chip stocks and holds them a long time. Seventy percent in stocks, 15 percent bonds, the rest cash.
Merrill Lynch Capital Funds Class "A," Merrill Lynch Funds, Princeton, N.J.; $846 million in assets; $250 minimum; 6.5 percent load; 18 percent compound annual return over 10 years; up 19 percent in 1989.
This is a conservative growth-and-income fund willing to hold a lot of cash or bonds, if necessary. Half of portfolio is stocks, 35 percent cash and the rest bonds.
In light of the recent problems of low-grade, or "junk" bonds, the bond funds chosen here have at least two-thirds of portfolios in investment-grade securities. In addition, they hold mostly medium-term bonds five to 12 years in duration.
Top all-weather bond funds are:
T. Rowe Price New Income Fund, T. Rowe Price & Associates, Baltimore; $972 million in assets; $2,000 minimum; no load; 10.48 percent compound annual total return (yield and price appreciation) over the past 10 years; 8.84 percent total return so far in 1989.
Boston Co. Managed Income Fund, Boston Co., Boston; $78 million; $1,000 minimum; no load but 0.45 percent annual 12B-1 fee; 11.31 percent annual total return over 10 years; 6.28 percent in 1989.
Babson Bond Trust Series "L," Jones & Babson Inc., Kansas City, Mo.; $71 million; $500 minimum; no load; 10.8 percent annual total return over 10 years; 9.87 percent in 1989.
Fidelity Intermediate Bond Fund, Fidelity Investments, Boston; $510 million; $1,000 minimum; no load; 12 percent annual total return over 10 years; 8.62 percent in 1989.
Bond Fund of America; American Funds, Los Angeles; $1.2 billion; $1,000 minimum; 4.75 percent load and 0.25 percent annual 12B-1 fee; 12 percent annual total return over 10 years; 8.66 percent in 1989.