10 Stock Funds for Tough Times

FAM Value (FAMVX) . This fund's 10-year record—a 4 percent annualized return—is better than its cousin's. Tom Putnam has steered FAM Value since its 1987 inception (comanager John Fox came on board in 2000). Just as with Equity-Income, the managers look for quality businesses with strong balance sheets, solid management teams, and shares that are selling at a discount. Although dividends are still important, they're less emphasized in this fund, as appreciation is the primary focus. FAM Value's top holdings include White Mountains Insurance Group, Berkshire Hathaway, and Market Corp.

2000-02 bear market return: 8 percent
2008 year-to-date return: -32 percent

American Century Equity Income (TW E IX) . Companies with a history of doling out dividends are the focus at this team-managed fund. Most of the fund's assets reside in large-company stocks, which the managers scoop up on the cheap (according to valuation measures such as price-earnings ratios). The portfolio, which counts ExxonMobil, General Electric, and AT&T among its top five stocks, also holds stakes in midsize companies and convertible bonds. The fund's long-term results are solid: Its annualized 6 percent return over the past 10 years ranks in the top 1 percent of all funds that invest in large, bargain-priced stocks.

2000-02 bear market return: 6 percent
2008 year-to-date return: -24 percent

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

Berwyn Fund (BERWX). Another solid choice for a small-company fund, the tiny $115 million Berwyn fund has a strong value bent. The managers buy stocks trading at deep discounts to expected earnings growth, and they aren't afraid to trim back on positions that have sharply appreciated. Recently, the fund's top holdings included several companies that have posted positive (or near positive) returns so far this year: Suffolk Bancorp, FPIC Insurance Group, and Granite Construction.

2000-02 bear market return: 6 percent
2008 year-to-date return: -31 percent

Forester Value (FVALX). Risk-conscious investors, listen up: In its history, Forester Value has lost money only in 2007, when it dropped 5 percent. It's down just 3 percent so far this year, which makes it the second-best performing U.S. stock fund (behind Embarcadero Alternative Strategies). The fund built up its cash stake earlier in the year, but recently, just more than 15 percent of its assets were in cash. Healthcare and food stocks make up Forester's top five, among them Johnson & Johnson and Kraft Foods, which have both held up relatively well in 2008.