Oakmark still requires only $1,000 to open an account. No sales charges or redemption fees. Buy now, and keep buying at regular intervals to smooth out your cost.

Low-Risk Mutual Fund #3

Balanced funds are for conservative, belt-and-suspenders investors. If you're a little more venturesome, you might consider a fund that invests in stocks but also writes (sells) call options against its holdings.

By selling options, the fund generates extra income, which helps limit losses in a falling market. However, the strategy can also put a drag on returns in a sharply rising market as some of the fund's stocks (or cash) gets "called away" to satisfy the options contracts.

The Eaton Vance fund group in Boston has a good deal of experience with option writing. I recommend their closed-end Eaton Vance Tax-Managed Diversified Equity Income Fund, which trades on the NYSE under the ticker symbol ETY.

ETY owns a number of the same stocks we're carrying in our model portfolio, such as ExxonMobil, IBM, Microsoft, Hewlett-Packard, Nestle and McDonald's. Simultaneously, the fund writes calls against the S&P 500 index.

ETY's track record only goes back a couple of years, but in 2007–08 the fund (at net asset value) outperformed the S&P 500 by a handsome margin of almost 14 percentage points.

Don't be fooled by ETY's extremely high dividend yield as quoted by most financial news outlets; most of it represents a return of your original capital. The fund's true cash yield is about 2.4%.

As editor of Profitable Investing, Richard E. Band is the newsletter world's #1 authority on investing for low-risk growth. His flagship Total Return Portfolio has tripled in value since its inception in 1990, while taking far less risk than the popular stock market index funds. See for yourself what Profitable Investing can do for you. In fact, try it for 6 months, 100% risk-free.