18 Funds Offering Consistent Returns

Corporate America just closed the books on the third quarter. Unfortunately, the recap of this one is much like the four that came before it: Companies are struggling to grow their businesses amidst a brutal global economic slowdown. And that dismal performance has had a domino effect on the mutual-fund industry. Of the 78 fund categories tracked by Lipper, the fund data company, none are in the black this year.

Anybody who has kept a close eye on their retirement account in 2008 has probably seen it swing wildly as the market deals with bankruptcies, outright failures and bailout plans. While there are individual funds that have managed to keep their heads above water, there are hundreds, if not thousands, of others that have lost more money than the broad market's 23%, including some funds run by the industry's most legendary managers.

If only there was a happy medium between the winners and losers.

Well, actually there is. This week's fund screen centers on what we call consistent performers. These funds got the top score on two Lipper criteria -- consistent return and preservation -- that measure an offering's ability to provide smooth, long-term performance regardless of any market condition that might come along. We started with a universe of 829 funds, but that group was quickly whittled down to 171 after we knocked out load funds. Once we added in our usual performance and fee benchmarks we were left with 18 funds. They are listed on the table below.

Since we usually don't include these two Lipper ratings in our weekly screens they require a bit of explanation. The consistent return measurement compares a fund's risk-adjusted returns over the trailing three-, five- or 10-year periods to those of its competitors. Preservation looks at the number of money-losing months a fund racked up during those same time periods. A "5" rating is the best in each category and a "1" is the worst. (We screened on funds scoring a "5".)

The funds that rated a "5" on both criteria have a history of providing relatively smooth rides vs. their competitors. They won't take off during bull markets. Indeed, they'll probably lag more aggressive offerings. However, they probably won't lose as much when things turn south. That means these funds are ideal for conservative investors. Aggressive ones should go looking elsewhere to build out their portfolios.

We need to repeat one word of warning from the last time we did this screen in May. Many funds are starting to roll off bad quarters from the last bear market. So a fund that might not have made our list just three months ago may now make the cut. It would pay to look back at how a given fund did during the period between 2000 and 2003, especially because it looks like we're in the middle of a similar -- and nastier -- situation right now.

Regular readers of this column will see some familiar names on the table. 1st Source Monogram Income Equity (FMIEX), which is due to become part of the Wasatch fund family, Amana Income (AMANX), Fairholme (FAIRX) and James Balanced Golden Rainbow (GLRBX) have made several of the other screens we perform throughout the year. They each have some commonalties: low fees, good performance and tenured managers at the helm. That always makes for a good combination in our minds.

The Criteria: The funds that made our cut this week rated a "5" in Lipper's consistent return and preservation categories. The funds charged less than a 1.5% annual expense ratio, required a minimum investment under $5,000 and they were open to new investors. They also had performance track records that put them in the top 10% of their categories during the trailing three- and five-year time periods. The funds also had year-to-date returns that exceeded the S&P 500. As usual, we didn't consider load funds.