9 Top Mutual Funds for Low-Risk Investors
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If you are approaching retirement or otherwise want to protect your nest egg from a sudden drop in value, there are many attractive but low-risk places to put your money. It's possible to put your cash in something other than a passbook savings or money market account and still sleep well at night.
Investors with a low risk tolerance should be able to rest easy when investing in any of these mutual funds. I've evaluated them based on a long-term record of wealth protection, and other factors, including low fees and overall market returns.
1. Fidelity Total Bond Fund [FTBFX]
You won't get rich quick from this fund, but you won't lose your shirt, either. Look for a steady annual return of between 2% and 5% from investments based off of the Barclays Universal Bond Index. A low expense ratio of .45% makes this a solid fund for investors with a low risk tolerance.
2. Wright Current Income Fund [WCIFX]
If you want security, it's rarely a bad idea to place your money in U.S. government bonds, as America always pays its bills. You'll see a steady annual return of 2%–4% with this fund and it will be nearly immune to the stock market dips we've seen over the years. I am not a fan of the 1.24% expense ratio, but this is otherwise a great fund for risk-averse investors.
3. USAA Government Securities Fund [USGNX]
Another strong fund that invests primarily in government securities, USGNX has some exposure to the mortgage sector — but not the subprime loans that got many funds in trouble in the previous decade. The expense ratio of .47% is almost unbeatable in this class, and investors can expect a reliable annual return of between 2% and 4%.
4. JP Morgan Government Bond Fund [OGGAX]
Safe, if unspectacular, this fund provides returns of between 2% and 4% annually from a mix of treasury notes, inflation-protected securities, and bonds.
5. Janus High Yield Fund [JAHYX]
Though it dipped in value last year, this is a fund with a steady track record of 6%–8% annual returns. With most of its money in high-yield bonds, it's also generally less risky than investing in stocks. Note, however, that its expense ratio of .87% is on the higher side.
6. TCW Total Return Bond Fund [TGLMX]
A five-star rating from Morningstar? Check. Low expenses? Check. Annual returns of between 5%–6% over the last decade? Check. This bond fund should hit the sweet spot for many investors looking to protect their wealth and get some income at the same time.
7. Fidelity Freedom Index 2020 Fund [FPIFX]
I am not usually a fan of target date funds, because fees are often high. But the expense ratio on this fund is just .23%, and it's a great fit for anyone who thinks they'll need their money in the next five years, or so. Investors have seen a five-year return of 7.67% and 10-year return of 7.89%.
8. Vanguard Wellseley Income Fund [VWINX]
Morningstar rates this fund five stars, and with good reason. It's garnered a five-year return of 9% and 10-year return of 7%, and has weathered the downturns better than most funds. We also like the expense ratio of just .25%. About 70% of this fund's money is in bonds, with the rest in stocks and cash.
9. Berwyn Income Fund [BERIX]
This fund isn't quite as conservative as others on this list, as it does invest about a third of its money in stocks. But this fund has managed an average annual return of about 7% over the last decade, and only dropped a relatively modest 10% during the most recent market downturn. Its expense ratio of .64% is reasonable.
Protecting your money from the vagaries of the market doesn't have to be difficult, and the funds above all offer reasonable investments for the risk-averse.
Do you have a favorite low-risk mutual fund?
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