Funds for Tough Times: Royce Special Equity

A relatively conservative stock fund that's been holding up better than its peers.

By + More

So far this year, not a single diversified stock fund has made money. Most have gotten creamed: According to Morningstar, the average loss for funds that invest in the United States is 42 percent, and, for those that invest internationally, 50 percent. Here's a look at relatively conservative stock funds that produced positive returns during the last bear market (March 24, 2000, through Oct. 9, 2002) and have been holding up better than their peers so far this year.

Royce Special Equity (RYSEX). In general, small-company funds don't offer much by the way of safety, as small companies are riskier than their more stable, large-company brethren. But this fund isn't a bad choice for investors looking to fill that hole in their portfolio. Managed by Charles Dreifus since 1998, Royce Special Equity sticks to a disciplined strategy, which reflects the philosophy of legendary value investor Benjamin Graham. Dreifus buys companies that have a high return on capital, and he makes sure not to overpay. He also takes a skeptical eye to company balance sheets and sells stocks when he thinks they're fully valued.

2000-02 bear market return: 19 percent

2008 year-to-date return: -23 percent

More funds for tough times:

Mairs & Power Growth

Yacktman and Yacktman Growth


FAM Equity-Income

FAM Value

American Century Equity Income

Berwyn Fund

Forester Value