6 Mutual Funds That Limit Volatility

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Below are six low-volatility mutual funds, as selected by Morningstar fund analyst Harry Milling. Each has either a top-rung 5-star or 4-star rating from Morningstar, based on past performance and the level of risk taken to achieve investment returns. Over the long-term, each fund has demonstrated lower volatility than its peers, based on several measures.

One of those is each fund's low "beta." That's a tool to measure how risky a stock or a fund is compared with the market. The broader market itself has a beta of 1.0. A beta below that indicates a fund is less volatile than the market. So a fund with a beta of 0.8 has below-average volatility, and can be expected to rise and fall more slowly than the market. A fund with a beta of 1.2 has above-average volatility. However, betas in different market segments may be higher or lower than the beta of the broader market. So it's a good idea to compare a fund against the beta of its market segment, rather than the overall market, as is done in the below chart.

The six funds, in alphabetical order:

1. American Century Equity Income (Stock Quote: TWEAX)

Category: Large-cap value stock
12-month return or loss: 3.32%
5-year annualized return: 0.76%
10-year annualized return: 4.67%
Fund's 10-year 'beta' vs. comparable index: 0.65 vs. 0.95

2. BlackRock Equity Dividend (Stock Quote: MDDVX)

Category: Large-cap value stock
12-month return or loss: 8.39%
5-year annualized return: 1.61%
10-year annualized return: 5.59%
Fund's 10-year 'beta' vs. comparable index: 0.80 vs. 0.95

3. Calamos Growth & Income (Stock Quote: CVTRX)

Category: Aggressive allocation
12-month return or loss: 7.78%
5-year annualized return: 3.28%
10-year annualized return: 5.95%
Fund's 10-year 'beta' vs. comparable index: 1.20 vs. 1.32

4. LKCM Equity Institutional (Stock Quote: LKEQX)

Category: Large-cap blend stock
12-month return or loss: 7.57%
5-year annualized return: 2.36%
10-year annualized return: 3.02%
Fund's 10-year 'beta' vs. comparable index: 0.90 vs. 1.00

5. Queens Road Small Cap Value (Stock Quote: QRSVX)

Category: Small-cap value stock
12-month return or loss: 5.96%
5-year annualized return: 3.48%
10-year annualized return: NA*
Fund's 10-year 'beta' vs. comparable index: 0.95 vs. 1.18*
*This fund doesn't yet have a 10-year record, so five-year data is listed on the fund's beta.

6. Royce Special Equity Investment (Stock Quote: RYSEX)

Category: Small-cap blend stock
12-month return or loss: 5.20%
5-year annualized return: 4.37%
10-year annualized return: 8.58%
Fund's 10-year 'beta' vs. comparable index: 0.75 vs. 1.11

Note: Return data through Aug. 18

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