|
|
Get Four
|  | JUNE 18, 2004
Mutual Funds That Go the Distance BW Personal Business Editor Lauren Young covers the field, with funds to suit a variety of investment goals The typical equity mutual fund did better than the Standard & Poor's 500-stock index last year -- and also over five years, says Lauren Young, a Personal Business editor at BusinessWeek. In the current state of the market, she sees mid-cap and larger stocks as better places to be than small-caps, and with bonds the choice should be short-term funds because of potential interest rate increases. Young, who covers mutual funds for BW, says the best fund choices for conservative investors could be names such as Dodge & Cox Income (DODIX ), plus Fundamental Investors (ANCFX ), Income Fund of America (AMECX ), and Washington Mutual (AWSHX ), all in the American family of funds. Among the growth funds, she reports that Calamos Growth (CVGRX ) does well in the screens applied by BW. Among funds focusing on tech stocks, Young especially likes the Firsthand Technology Value fund (TVFQX ), run by Kevin Landis, who she says keeps on top of all the latest developments. She cautions, however, that since tech stocks can be volatile, investors need to be patient for good returns. These were some of the points Young made in an investing chat presented June 15 by BusinessWeek Online and Standard & Poor's on America Online, in response to questions from the audience and from BW Online's Jack Dierdorff. Edited excerpts follow. A full transcript is available from BW Online on AOL at keyword: BW Talk. Q: As we near the end of first-half 2004, have mutual funds mirrored the market? And what types have done best? A: So far this year, in terms of what has done well, mutual funds that are very concentrated have been great -- they're also called focused funds. And I think that's emblematic of the fact that this is a stockpicker's market. Q: Do you recommend specialty funds, like Fidelity's? A: I like the sector funds a lot -- if you think a sector is going to do well. They don't traditionally tend to be funds that you would hold until retirement. They're designed to be funds that you can trade in and out of. I've been speaking to a lot of fund managers lately, and they really like the retail sector. So probably the best way to play retail right now would be the Fidelity Select Retailing (FSRPX ) portfolio. Ditto for semiconductors. Fidelity really has a lot of specialized technology portfolios. Q: What's your fund recommendation for income over 9%? A: Well, my first-blush answer would be look for a good REIT fund. But I think this is probably not the best time to be getting into REITs, because higher interest rates could put a damper on their underlying portfolios. That said, you can still get a nice yield from junk bonds. But again, they've had such a great run, chances are that they won't appreciate as much as they have in the past. So I guess this is a very long-winded way of saying I would try to construct a portfolio for income from a few different sources -- maybe a little REITs, a little high-yield, some dividend-paying stocks. I think that's probably your best bet. Q: What are the best stock funds for a conservative, risk-averse investor? A: Dodge & Cox -- they've closed their stock fund (DODGX ), but the balanced fund (DODBX ) is still open and has many of the same holdings as the Dodge & Cox Stock Fund. I also think American funds, by far as a family, have some of the most conservative yet solid stock funds -- namely, Fundamental Investors (ANCFX ), Income Fund of America (AMECX ), and Washington Mutual (AWSHX ). Q: What drug and pharmaceutical funds do you like? A: Well, I feel like a broken record, but I always tell people that my favorite health-care fund is Vanguard Health Care (VGHCX ), run by Ed Owens. But the cost of entry is steep -- it's $25,000. So that's not going to be great for everyone. That said, Eaton Vance Worldwide Health Sciences (ERHSX ) is a really good health-care fund. And T. Rowe Price Health Sciences (PRHSX ) is another solid offering. Q: My 401(k) is going to cash out at the end of July -- I'm currently between jobs and wondering what I should do. A: I'm assuming by "cash out" that you're retiring, but it sounds to me like you're looking for another job. So I'm a little confused. But if you can, and you're young enough, I would roll it over to a big fund company like Fidelity. In fact, Fidelity just launched an amazing service for people in retirement. It's free right now, but at the end of the year you'll need about $100,000 in assets to avoid any fees. What's great about the service is that they take all of your income -- your Social Security checks, your pension plan, your 401(k) -- and they help you determine how much money you need every month to live. And they give you a set amount every month. So if you can park the money in Fidelity, it will help you become a customer when you do retire. Q: What do you think of Firsthand Technology Value fund (TVFQX )? A: I like the Firsthand Technology Value fund a lot. [Manager] Kevin Landis is, I think, one of the smartest tech investors. Every time I talk to him, he tells me about some new technology or product that's going to change the world as we know it. But having said that, this is a fund that really soars when tech is doing well -- like last year, when it was up almost 75% -- and it plunges when tech is doing terribly. So I definitely wouldn't put all of my money into this fund -- maybe 5% to 10% of your portfolio should be allocated purely to tech. And you have to be willing to stick around for a long time to make money. Q: About 30% of my mutual-fund money is in short-term bond funds (Vanguard). What do you think about bonds? A: Well, even Bob Auwerter, who runs Vanguard's fixed-income group, is wary about fixed income right now. That said, he is (and I agree with him) much more concerned about long-term bonds. I don't think it's going to be a stellar time for fixed income. But I think you're smart to stay in short-term debt. The Vanguard Short-Term Treasury Fund (VSFIX ) and the Vanguard Short-Term Corporate Fund (VFSTX ) are excellent offerings.
BW MALL
SPONSORED LINKS
Buy a link now! | | |
 Copyright 2004, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Notice |
Printer-Friendly Version
