Transcripts

"Of Mutual Interest," John Waggoner, Mutual Fund Columnist at "U.S.A. Today"

SUSIE GHARIB: In tonight's "Of Mutual Interest," John Waggoner says in a market like this, boring funds are good. He's mutual fund columnist at "U.S.A. Today."

JOHN WAGGONER, MUTUAL FUND COLUMNIST, USA TODAY: In a steaming, rip- roaring stock market, bold funds that invest in small, rapidly growing companies turn in the best performance. Unfortunately, this is not one of those markets. And if you're tempted to dive back into the stock market, you want funds that are in touch with their inner cowards. In short, you want funds that buy stocks of big, stodgy companies that pay regular dividends and never do anything unexpected. A dividend, after all, is a direct payment of a company's earnings to shareholders. Over time, dividends play an enormous role in your total return. For example, the Standard & Poor's 500 stock index has gained 726 percent the past 30 years. Toss in dividends though, and the index has soared 1,900 percent. Companies that pay dividends only do so if they can comfortably afford to. Cutting a dividend is pure poison for a stock and companies only hike their dividends if they're sure they can continue to pay at the same level. So if you're a true coward, seek funds that invest in strong, dividend-paying companies. One pick is the SPDR S&P dividend fund, an exchange-traded fund that trades under the ticker SDY. This low- cost index fund buys shares of companies that have raised their dividends every year for the past 25 years. You might also consider the Wisdom Tree Total Dividend fund, which invests in a broad spectrum of dividend-paying stocks. Its ticker is DTD. If you prefer actively managed funds, try an equity income fund. Heartland Value Plus has the top 10-year record in that category. These funds won't mark you as a bold, daring investor. But if you're scared of this market -- and who isn't -- these funds will help reduce some of your terror. I'm John Waggoner.