What's worrying the market right now shouldn't bother holders of these three MONEY 100 funds
(MONEY Magazine) – Given today's uneasy business climate, investors would be wise to stick with companies that prosper during times of rising interest rates, return some of their profits to shareholders as dividends or dominate growing niches. If you want to do this without buying individual stocks, consider these three MONEY 100 funds.
• If interest rates rise, so could the fortunes of Dreyfus Appreciation (800-373-9387). That's because fund manager Fayez Sarofim sticks to blue chips, those large corporations characterized by sound finances. Two examples: Coca-Cola and Walgreen. Sarofim holds about 50 stocks and tends to keep them for, on average, 10 years. While the fund has logged negative yearly returns (-1.04%) during the past half decade, it still ranks higher than two-thirds of its peers and keeps charges for expenses at less than 1%.
• When interest rates rise, they also crimp long-term bond returns. T. Rowe Price Equity Income (800-638-5660) is a good substitute for some of the long-term bonds in the income portion of your portfolio. The fund focuses on companies that pay higher dividends than the average stock does, and buys shares when they fall below past levels of valuation. Recent top holdings ChevronTexaco and Merck each pay a 3.4% dividend. The fund, managed by veteran stock picker Brian Rogers, has outrun 85% of its rivals over the past five years.
• A good way to combat the effects that a sluggish economy can have on your portfolio is to invest in mid-size companies that are exploiting growing niches. Lately Richard Aster, manager of Meridian Growth (800-446-6662), has shown a knack for spotting those opportunities. Aster scouts for companies that he figures can maintain double-digit profit growth over the next three or so years. One recent favorite: Laboratory Corporation of America, which provides clinical tests to medical groups. Over the past five years, Meridian has returned an annualized average of 15%, which is tops in its class. —N.P.