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The purpose of this adventure was to find some fund investments that have done well consistently over a 10-year period that investors can afford. The results were surprising to me.

Criteria

All data was screened from Morningstar

  • Manager Tenure - 10 years or more
  • Minimum Purchase - $2,500 or less
  • No Load and Closed End Funds Only
  • YTD Return > 10% and beat the Dow
  • 1 Year Return > 10% and beat the Dow
  • 3 Year Return > 10% and beat the Dow
  • 5 Year Return > 10% and beat the Dow
  • 10 Year Return > 10% and beat the Dow
  • 1 Year Return > 10% and beat the Dow
  • Lost less than the Dow during 2008 when the market crashed

There were only 3 funds out of all the funds on Morningstar that met the above criteria. Here they are and how they compared to the Dow.

YTD 1 yr 3 yr 5 yr 10 yr 2008 Min Invest
Dow Jones 12.60% 23.86% 14.79% 2.21% 8.48% (32.00%)

T. Rowe Price Health Sciences (PRHSX)

35.18% 41.20% 23.10% 11.16% 14.76% (28.77%) $2,500

Prudential Jennison Health Sciences Z (PHSZX)

32.12% 42.37% 22.25% 11.08% 17.42% (25.97%) $1,000

H&Q Life Sciences Investors (HQL)

41.82% 60.52% 28.50% 11.27% 12.95% (27.85%) None

Note that numbers in parenthesis above are negative.

Surprises

All three of the funds screened are healthcare related. Some healthcare stocks are considered cutting edge technology, which sounds very risky, but these fund managers have consistently picked winners. Most of the healthcare funds that showed up in the screens outperformed, but these outperformed on every criteria beating funds in every sector for 10 years on a consistent basis.

Analysis and action

All three of these funds have consistently outperformed the market at every turn including 2008, when the market plunged. Every few years, some folks think this sector will have problem because of new government regulations and healthcare costs, but that has just not been the case, and I suspect it won't be in the future. The population is aging, which will continue to fuel healthcare, and the fund managers that see the opportunities will do well. With these track records, I'm going to invest in these this week.

The one caveat would be if the fund managers change. I want to go with the winners. These funds seems like they all belong in my retirement account. If I invest $2,500 each in all three ($7,500 total), it will be less than the minimum on some funds and I'll have some diversification to boot. T. Rowe Price Health Sciences and Prudential Jennison Health Sciences Z are both regular mutual funds that have low minimum investments. H&Q Life Sciences Investors is a closed-end fund that trades like a stock. Surprisingly, it usually sells at a slight discount to net asset value. It currently trades at a 2.92% discount and has a 7.83% distribution.

Source: 3 Retirement Picks: Sleep Easier, 10% + Returns For 10 Years

Additional disclosure: I have no positions in PRHSX and PHSZX but likely will over the next week.