TY - JOUR T1 - Should Preferred Stock Funds Be Included in Mutual<br/>Fund Portfolios? JF - The Journal of Wealth Management SP - 83 LP - 96 DO - 10.3905/jwm.2017.20.1.083 VL - 20 IS - 1 AU - Anthony L. Loviscek Y1 - 2017/04/30 UR - https://pm-research.com/content/20/1/83.abstract N2 - Should preferred stock funds, despite their lack of attention from Wall Street, academia, and the financial media, be preferred in mutual fund portfolios? To address this question, we construct mean–variance-efficient portfolios from U.S.-centric mutual funds that represent common stocks, Treasury bills, Treasury bonds, corporate bonds, real estate investment trusts, and preferred stocks to determine whether a preferred stock fund meets the standards for inclusion in mutual fund portfolios. We also conduct robustness checks on the results and perform out-of-sample tests on portfolio performance with and without the preferred fund. Overall, the evidence indicates that a preferred stock fund allocation in the range of 5%–15% can reduce portfolio risk while at least preserving portfolio return, providing a cushion for portfolio managers of balanced funds and for income-seeking investors.TOPICS: Mutual funds/passive investing/indexing, portfolio construction, statistical methods, performance measurement ER -