(PUB) Investing 2016

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Funds on the Stock-Heavy Side Tracking Morningstar Analyst Ratings | Russel Kinnel

and downside capture is 147% . Returns have landed in the top quartile over the past three-, five-, and 10 -year periods. T. Rowe Price Personal Strategy Growth TRSGX This Silver-rated fund of funds has a neutral setting of 80% equities, making it a fairly aggressive fund. As with other Personal Strategy funds, the asset mix can be adjusted by the allocation team depending on its view of markets. The underlying funds are strong and the all-in fee is 0 . 78% . The fund’s maximum drawdown of 48% and downside capture ratio of 153% are worse than the other two Silver-rated funds in the category. On the plus side, the fund has top-decile returns over the past five-, 10 -, and 15 -year periods, and its three- year returns are just outside the top decile. Franklin Mutual Shares TESIX This Bronze-rated fund is the Morningstar 500 ’s sole Medalist in the 85% + category. It’s a value strategy applied to equities as well as distressed debt at times—hence its place in the category. In its March 31 , 2016 , portfolio, the fund had 71% in U.S. stocks, 19% in foreign stocks, 4% in bonds, 2% in other (usually convertibles or preferreds), and 4% in cash. That gives it a little less in stocks and little more in bonds and foreign stocks than a typical large-cap value fund. Its 50% maximum drawdown and 152% downside capture ratio show that things don’t always go according to plan. Also, performance has been rather middling depending on the time period you pick. Lead manager Peter Langerman looks for cheap stocks from a variety of angles, including valuations, attractive merger targets, or other types of distress. That was a good formula for defense in the 2000 - 02 bear market, but it didn’t do so well in the 2008 - 09 bear market when many deep-value funds got burned by finan- cials or heavily indebted cyclical stocks. Ratings History Fidelity Four-in-One Index has been rated Silver since June 2012 . The other three have had their current ratings since we launched Analyst Ratings in November 2011 . K

In the cover story, I looked at the top allocation funds with less than 70% equity. Here I’ll look at the two categories with more than 70% equity. There are three very different Morningstar Silver Medalists in the Allocation— 70% to 85% Equity category and one Bronze Medalist in the Allocation— 85% + Equity category. American Funds Income Fund of America AMECX With a Morningstar Analyst Rating of Silver, this fund boasts a 12 -month yield of 3 . 09% , placing it third among all the allocation funds in the Morningstar 500 . The only two that are higher are in the 30% to 50% Equity category. Yet, the maximum drawdown of 41% and downside-risk capture of 113% mark it as one of the lower-risk funds in this equity-heavy category. One reason is that it is right on the borderline of the category with a 70% equity weighting. Manage- ment has been moving to the equity side because it considers the yields on equities to be more appeal- ing than those on bonds. Prior to 2011 , the fund’s equity weighting was in the low 60 s. The basic idea of the fund is to maximize yield without taking on too much risk. That’s a strategy that American has executed well here and at other funds. Equities must have a yield well above the S & P 500 ’s. The bond side takes on some in- terest-rate and credit risk to produce a decent yield. The fund has landed in the top quintile of its peer group for the trailing three-, five-, and 10 -year periods. Fidelity Four-in-One Index FFNOX The Silver-rated fund has a set asset mix of 48% in Fidelity Spartan 500 Index FUSEX , 25% in Fidelity Spartan International Index FSIIX , 14% in Fidelity Spartan US Bond Index FBIDX , and 12% in Fidelity Spartan Extended Market Index FSEMX . The all-in fee is 0 . 22% . The fund’s maximum drawdown was 46%

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