Dodge & Cox is one of the most outstanding wealth management firms in the fund industry. 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 Morningstar as an exemplary firm, and three of its core funds have earned five-star overall ratings from Morningstar.
Dodge & Cox Balanced Fund
With 15.8 billion in assets under management (AUM) as of Sept. 30, 2018, the Dodge & Cox Balanced Fund seeks regular income and, to some extent, capital appreciation by investing in a mix of equity and debt securities. The fund does not take a typical 60% stocks, 40% bonds approach. Rather, it can hold anywhere from 25% to 75% of its assets in stocks. In Sept. 2018, the fund had 66.9% of its assets allocated to common stocks, while bonds had a 25.3% allocation. And the highest concentration of assets was in the financial sector at 21.2%. The fund typically holds large-cap, high-quality stocks, and its bond holdings are mostly investment-grade.
While the fund's returns are above average, its opportunistic approach in taking higher equity stakes can create higher volatility than one would see with an all-bond fund. From Sept. 2008 to Sept. 2018, the fund demonstrated a 10.04% average annual return and an 11.73% standard deviation, which resulted in a 10-year Sharpe ratio of 0.95.
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.
Dodge & Cox Stock Fund
The Dodge & Cox Stock Fund had $74.6 billion of AUM as of Sept. 30, 2018, and invests in a diversified portfolio of large-cap common stocks that show value characteristics. Its greatest concentrations were in financials and healthcare stocks, at 24.3% and 24.2%, respectively. Management is known for taking contrarian positions in disliked stocks that sometimes pay off well. With a turnover rate of just 8%, the fund is very 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 11.82% average annual return from Sept. 2008 to Sept. 2018, and a 15.97% 10-year standard deviation, resulting in a Sharpe ratio of 0.85. The fund has a five-star rating from Morningstar, a low net expense ratio of 0.52% and charges no load fees.
Dodge & Cox Income Fund
With $56.9 billion of AUM as of Sept. 30, 2018, the Dodge & Cox Income Fund seeks high and stable current income by investing in a diversified portfolio of high-quality fixed-income securities. About 51% of the fund's assets had AAA ratings in Sept. 2018, and 31% of its bond holdings were rated BBB. The fund had an average duration of 4.4 years and a 3.36% 30-day SEC yield.
Like other Dodge & Cox funds, the Dodge & Cox Income Fund employs a time-tested investment approach that works well over the long term. The fund generated a 5.33% average annual return from Sept. 2008 to Sept. 2018, and a 3.42% standard deviation, producing a 1.49 Sharpe ratio. Morningstar has awarded the fund an overall five-star rating, and it has no load fees and comes with a very low 0.43% net expense ratio.