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During the past 20 years, the author has watch China move from being a developing country into an industrial superpower
Money Moves, 5/24: Chocomize Co-Founder Fabian Kaempfer talks with Bloomberg’s Deirdre Bolton about the business of customizing chocolate
The president's campaign has a new rule—no cell phones allowed
In honor of remote control inventor Eugene Polley, we recognize other influential but neglected inventors who have felt the sting of stolen glory
Forget Adderall. Traders now pop chia seeds to stay focused and energized
The Italian automaker and others are adding hybrid technology to elite cars
The storied bridge that links San Francisco and Marin County changed the face of California
Schools cultivate ties with startups before they're big successes
Dave McClure's traveling venture capital show scours the world for promising startups
Get Four
|  | NOVEMBER 21, 2003
Funds: "A Minefield without a Map" [Page 2 of 2] Q: If you wanted to tiptoe into bond funds for the first time, where should a senior-age person begin? A: At this point in the market, I would be looking for a relatively short-term bond fund, because interest rates are more likely to rise than to fall, and as interest rates rise, the principal value of the bonds falls. You want to be in shorter-maturity bonds to limit your exposure to the loss of principal. PIMCO has a good low-duration bond fund. Q: I have about $80,000 in Putnam New Opportunities (PNOPX ) -- should I stay or go? That question could be applied to the whole Putnam family in view of the trading scandals and the suits against it. A: It's difficult to know when to leave a fund, especially when there's such turmoil in the market. You don't know if the fund you're going to jump to is going to be the next one subject to some scrutiny. However, this fund has had an especially bad track record since the new management team took over in 2000. Given this, with the current circumstances, it may be a good idea to look for a different mid-cap growth fund. Q: Are Mairs & Power Growth Fund (MPGFX ) and Dodge & Cox Stock Fund (DODGX ) good buys? A: I really, really like the Dodge & Cox fund. This is managed by a very experienced team, and has been very successful for extended periods. The Mairs & Power Growth Fund has also had an excellent track record, but it tends to focus on companies established in the Midwest. As a result, it's not as diverse as some of its peers. Q: Any thoughts on the American Funds group? Seems their 5- and 10-year returns are very good. A: I think the American Funds are also one of the premier fund groups in the U.S. They have a very strong lineup of products that all seem to do consistently well. It's tough to go wrong with them. Q: I own shares in Alliance Bernstein Growth & Income fund (CABDX ). They, too, are in trouble. Should I sell? A: At this point, I would be patient and hold on. We think this is a very good fund, and it's worth waiting to see if there's more information before making any decisions on this one. Q: Thoughts on IMS Capital Value (IMCSX )? Out of Portland, Ore. A: This fund has had an amazingly strong track record, but it has been developed on a fairly small asset base. As a result, the manager's stock-picking abilities have not really been tested yet. Plus, this fund appears to invest in a a broad cross-section of large-, mid-, and small-cap stocks and, as a result, would be difficult to use in an asset allocation. Also, its expense ratio is fairly high, and the minimum investment is $10,000. Q: Would you recommend any REIT funds, like the Vanguard REIT fund (VGSIX )? A: REIT funds are good to round out a portfolio, but not necessarily to be a core position. Cohen & Steers specializes in real estate funds and has established a good reputation in this area. The Vanguard REIT fund is an index that tracks the broad real estate market and is an attractive alternative to a more actively managed real estate fund. Q: Your take on tax-free bond funds? A: If you're trying to minimize your tax returns, tax-free bond funds are a good alternative. Franklin offers a wide variety of them. They can be as narrow as a single state fund or as broad as a national fund. Q: My wife would like to know your feelings on FPA Capital Fund (FPPTX ). A: This fund has had a stellar long-term track record and has been run by the same manager for almost 20 years. The asset base is very reasonable, and the expenses are low. If you're looking for a small-cap fund, this is a good alternative. Q: Thoughts on Firsthand funds? Thanks. A: Well, as with a lot of technology funds, the Firsthand group has experienced a large loss of assets. However, they have a very broad definition of technology for some of their funds. For example, in the Technology Leaders Fund (TLFQX ), they look to invest in companies that are utilizing technology, rather than just technology companies. In its top 10 holdings you have eBay (EBAY ) and Time Warner (TWX ). The lesson here is to check out the mandate of the Firsthand funds very carefully before investing. Q: Finally, Phil, are mutual funds still a sound investment for the average person, amid all these headlines? A: Absolutely. I think mutual funds have provided a very effective and efficient way for a large part of the public to invest and help meet their financial goals. I think they will continue to be a very productive resource. The long-term results of these scandals may actually be a better product for investors.
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