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The 5 Best Mutual Funds for a Rocky Market

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The stock market has given investors a bad case of whiplash over the past few months. In December, the Standard & Poor’s 500-stock index tumbled 9%. Since then, however, the benchmark has reversed course and climbed 11%.

When the market makes violent swings, the worst thing you can do is to try to stay in sync with it by selling when stocks fall and purchasing when they rebound. But if you own a fistful of volatile funds – even excellent ones – a market like today’s can sucker you into making the wrong trades.

The solution? If you’ve made a bad trade or two, or simply are losing sleep over the potential for another bout of market rockiness, consider replacing one or two of your most volatile funds – no matter how good they are – for more placid vehicles.

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Excellent work by Russel Kinnel at Morningstar has shown that individual investors have a much easier time holding on to less volatile funds than more volatile fare. Consequently, investors in those lower-risk funds, on average, tend to make more money over time than do investors in jackrabbit funds.

The point, after all, isn’t to own funds that will beat the benchmark in full-throttle bull markets. Less volatile funds likely will outpace the indexes during bear markets and earn healthy overall returns over a full market cycle while giving you more peace of mind.

Here are five of the best mutual funds for a jumpy market like today’s. Some are pure stock funds, while others hold some bonds.

SEE ALSO: The 25 Best Low-Fee Mutual Funds You Can Buy

Data is as of Feb. 20. Yields represent the trailing 12-month yield, which is a standard measure for equity funds.

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