Conservatively managed mutual funds often fail to keep pace during a strong bull market. That again has been the case during the latest run-up in stocks. The adjacent chart reveals that owning a conservative manager has almost necessarily meant trailing the S&P 500 over the past three years. Just 1% of large cap mutual funds (11 out of roughly 1,100) have outperformed the S&P 500 over that time while exhibiting less risk. Of those, two are frequently owned by Hefren-Tillotson Investment Advisory clients: Vanguard PRIMECAP Core (VPCCX) and PRIMECAP Odyssey Stock (POSKX).
It is important to evaluate a mutual fund over a full market cycle. Conservative managers can prove their worth during bear markets. Less downside risk can improve the odds of outperforming over a full cycle and increase the likelihood that an investor will stick with his or her investment program over the long run.