Dodge & Cox is an outstanding wealth management firms in the mutual fund industry, with a long track record of success. The company's management team tends toward a collaborative approach with a wide idea generation process. Dodge & Cox managers are also invested in their funds and, therefore, have a strong incentive to maximize shareholders' returns.

The company has been recognized numerous times by mutual fund analytics firm Morningstar as an exemplary firm, and several of its core funds have earned four- and five-star overall ratings from Morningstar.

According to Morningstar, Dodge & Cox's investment-committee structure is "exemplary". Each fund's 8-member committee mixes veteran investors with rising talent. Collaborative decision-making and gradual, well-telegraphed personnel changes promote long-term consistency and stability. The firm draws its committees from a deep research pool of more than 60 equity and fixed-income managers and analysts.

Below, we take a look at three highly-rated Dodge & Cox mutual funds, highlighting their investment strategy, performance, and pros & cons.

Key Takeaways

  • Dodge & Cox is a well-known actively managed mutual fund company, offering a range of investment products.
  • Among its mutual fund family, three come very highly rated by Morningstar, Inc.
  • Morningstar ratings allow investors to quickly evaluate the quality and past performance of a mutual fund.
  • The Dodge & Cox funds we highlight consistently beat their benchmarks and come with relatively low management fees.
  • Here, we look at three of these funds: The Dodge & Cox Balanced Fund, Stock Fund, and Income Fund.

Morningstar Ratings

Morningstar is a highly respected and reliable source of independent investment analysis, specializing in mutual fund and ETF research. The data and research provided by Morningstar culminate in its intuitive rating system that uses stars, rating funds on a one- to five-star scale.

Morningstar uses a proprietary mathematical evaluation based on a fund’s past performance to determine its rankings within a category. Funds with track records of three years or less do not qualify for Morningstar's rating system. Morningstar's rating system does not reflect the opinions of the company. Rather, it is an objective comparison of a fund’s performance in relation to its peers within its category.

The top 10 percent of funds within each category receive five-star ratings, and the bottom 10 percent receive one-star ratings. Funds are rated on a three-year, a five-year, and a 10-year basis. Together, these three ratings are combined to give each fund an overall star rating. Morningstar updates its rankings monthly.

Morningstar Ratings are distributed on a modified bell curve distribution: 10% receive a 5-star rating; 22.5% receive a 4-star rating; 35% receive a 3-star rating; 22.5% receive a 2-star rating;and 10% receive a 1-star rating.

Naturally, investors prefer to invest their money in four- and five-star funds as opposed to one- or two-star funds. It is for this reason that many retail investors rely heavily on Morningstar's evaluations when making mutual fund decisions. While there are some critics of the star-rating system, it serves as a good heuristic for individual investors.

Dodge & Cox Global Bond Fund (DODLX)

The Dodge & Cox Global Bond Fund (DODLX) was established in 2014 and invests in a diversified portfolio of bonds and other debt instruments of issuers from at least three different countries, which may include emerging market countries. The Global Bond Fund is not required to allocate its investments in set percentages to particular countries and may invest in emerging markets without limit.

Under normal circumstances, the Fund invests at least 40% of its total assets in securities of non-U.S. issuers and at least 80% of its total assets in debt instruments, which may, in each case, be represented by derivatives such as forward contracts, futures contracts, or swap agreements. Debt instruments in which the fund may invest include, but are not limited to, government and government-related obligations, mortgage- and asset-backed securities, corporate and municipal bonds, and other fixed and floating rate instruments rated Baa3/BBB- or higher. The Fund invests in both U.S. dollar-denominated and non-U.S. dollar-denominated debt instruments.

As of January 2021, DODLX holds just under $1 billion in assets. It charges a 0.45% expense ratio, which is low for actively managed global bond funds. Investors are required to invest a minimum of $2,500 ($1,000 for IRAs). The fund invests only in fixed-income securities with a medium credit rating of BBB, a portfolio effective duration of 4 years, and a yield of 2.41%. The fund's 1-, 3-, and 5-year annualized performance as of 1/20/21 is 10.7%, 7.0%, and 8.2%, respectively—in each instance outperforming its peers and benchmark by a significant degree.

Due to its strong long-term track record, consistent investment process, and low fees, the fund has earned a five-star overall rating from Morningstar.

DODLX Top 10 Holdings (as of December 31, 2020)
Holding Portfolio %
Federal National Mortgage Association (FNMA)2.5%  5.20
Federal National Mortgage Association (FNMA) 2%  4.45
Indonesia (Republic of) 8.25%  3.17
Fnma Pass-Thru I 2% 2.63
United States Treasury Notes 0.25% 2.31
India (Republic of) 8.24% 1.78
United States Treasury Notes 0.25% 1.59
FNMA Pass-Thru I 2% 1.42
Secretaria Tesouro Nacional (Brasil) 6% 1.35
Mexico (United Mexican States) 2% 1.35
Source: Morningstar

DODLX Pros & Cons

The Dodge & Cox Global Bond Fund is a 5-star fund, making it very high quality and suitable for a wide range of investors. It has a relatively low expense ratio, but does require a minimum investment to get started. As a global bond fund, it is well-diversified geographically, but since it includes emerging-markets bonds and non-dollar-denominated securities there is greater-than-average exposure to country risk and currency risk.

Pros
  • 5-star Morningstar Rating

  • Has outperformed its peers and benchmark

  • Low expense ratio for its class

  • Globally diversified

Cons
  • Requires a minimum $2,500 investment

  • Exposure to country-specific risk

  • Exposure to currency risk

  • Use of derivatives may not be appropriate for all investors

Dodge & Cox Stock Fund (DODGX)

The Dodge & Cox Stock Fund (DODGX), started in 1965, had $70.7 billion of AUM as of January 20, 2021, and invests in a diversified portfolio of mid- and large-cap common stocks that show value characteristics.

The fund focuses on the underlying financial condition and prospects of individual companies, including future earnings, cash flow, and dividends. The greatest concentrations of its 77-stock portfolio have been in financials and healthcare stocks, both sectors together making up around half of all investments. DODGX's management is known for taking contrarian positions in disliked stocks that sometimes pay off well. With a turnover rate of 17%, the fund is active but still tax-efficient.

The Dodge & Cox Stock Fund employs a consistent investment approach that outperforms major indexes, such as the S&P 500 Index and the Russell 1000 Value Index, in the long run. The fund demonstrated an average annual return of 10.66% and 3- and 5- year returns of 7.45% and 15.96%, respectively.

The fund has a four-star rating from Morningstar, a relatively low net expense ratio of 0.52%, and charges no load fees, but requires a minimum of $2,500 invested.

DODGX Top 10 Holdings (as of December 31, 2020)
Holding Portfolio %
Capital One Financial Corp  4.25
Charles Schwab Corp  3.94
Wells Fargo & Co  3.73
Comcast Corp Class A 3.32
Alphabet Inc Class C 3.28
HP Inc 3.15
FedEx Corp 2.87
Cigna Corp 2.87
Bank of America Corp 2.84
MetLife Inc 2.78
Source: Morningstar

DODGX Pros & Cons

The Dodge & Cox Stock Fund has outperformed its peers and benchmark on a long-term basis and has a relatively low expense ratio for an actively managed equity fund. It does require a minimum dollar amount to become an investor in the fund, and while it scores an overall long-term 4-star rating, Morningstar only scores it 3 stars over the past 3 years.

Pros
  • 4-star Morningstar rating

  • Has outperformed its peers and benchmark

  • Low expense ratio for its class

  • Low turnover rate

Cons
  • Requires a minimum $2,500 investment

  • Morningstar rating has declined recently.

Dodge & Cox Income Fund (DODIX)

With $69.1 billion of AUM as of January 20, 2021, the Dodge & Cox Income Fund (DODIX) seeks high and stable current income by investing in a diversified portfolio of high-quality fixed-income securities.

The fund may invest up to 20% of its total assets in debt securities rated below investment grade, commonly referred to as high-yield or "junk" bonds; provided no more than 5% of total assets are invested in securities rated below B3/B-. Currently, about 60% of the fund's assets are AAA ratings, and 27.5% of its bond holdings are rated BBB. The fund had an average duration of 4.9 years and a 2.38% 30-day SEC yield.

Like other Dodge & Cox funds, the Dodge & Cox Income Fund employs a time-tested investment approach that has worked well over the long term. The fund generated an 8.31 annual return as of January 20, 2021, and 3- and 5-year average annualized returns of 6.2% and 5.7%, respectively—greatly outperforming its peers and benchmark.

Morningstar has awarded the fund an overall four-star rating. It, too, requires a $2,500 minimum investment and comes with a 0.42% expense ratio.

Holding Portfolio %
Federal National Mortgage Association (FNMA) 2.5%  3.56
United States Treasury Notes 0.12%  3.04
Federal National Mortgage Association (FNMA) 2%  2.04
United States Treasury Notes 0.88% 1.58
Federal Home Loan Mortgage Corporation (Freddie Mac) 2% 1.28
Federal Home Loan Mortgage Corporation (Freddie Mac) 2% 1.07
United States Treasury Notes 0.62% 0.95
Federal Home Loan Mortgage Corporation (Freddie Mac) 2% 0.92
Imperial Brands Finance Plc 4.25% 0.89
Charter Communications Operating, LLC/Charter Communications Operating Capi 0.89

DODIX Pros & Cons

The Dodge & Cox Income Fund has a relatively low management fee and outperforms its peers. It also achieves above-average returns without sacrificing the quality of its fixed-income holdings. It does have a $2,500 minimum investment requirement like other Dodge & Cox actively managed funds.

Pros
  • 4-star Morningstar rating

  • Has outperformed its peers and benchmark

  • Low expense ratio for its class

  • Portfolio average credit rating is A

Cons
  • Requires a minimum $2,500 investment

Dodge & Cox FAQs

What Does Dodge & Cox Do?

Dodge & Cox is an actively managed mutual fund provider founded in 1930, amidst the Great Depression. The philosophy that guides the management of their investment portfolios is built on traditional principles, with a long-term horizon, a rigorous price discipline, and conducting independent in-house research.

Is Dodge & Cox a Good Investment?

Dodge & Cox mutual funds tend to be highly-rated, with well-respected professional portfolio managers and world-class research. Their funds have often outperformed both peers and benchmarks. Depending on your individual investment goals, risk tolerance, and time horizon, any one or combination of Dodge & Cox mutual funds may be appropriate in your portfolio. You should do your own due diligence before adding any investment to your holdings.

What Does Dodge & Cox Invest In?

Dodge & Cox manages several no-load, low-fee active mutual funds. These include equity-focused funds: The Stock Fund; Global Stock Fund; International Stock Fund; and Emerging Markets Stock Fund. There is also a suite of fixed-income funds: the Income Fund and Global Bond Fund. Dodge & Cox also offers a balanced fund holding both stocks and bonds.

Is the Dodge & Cox Stock Fund Open to New Investors?

Yes, as of January 2021, DODGX is open to new investors, but requires a $2,500 minimum investment ($1,000 for IRAs).

What Is Dodge & Cox Performance?

Each mutual fund that Dodge & Cox offers has its own track record and performance history. In general, Dodge & Cox tends to outperform its peers. Note that past performance is no guarantee for future returns.

The Bottom Line

Dodge & Cox actively managed mutual funds may be among those that you consider adding to your long-term core holdings. These no-load funds provide active management that has produced alpha consistently over the years, and with relatively low expense fees. Here, we highlighted three of their funds that have received high marks from Morningstar, earning 4 and 5 stars.