Eaton Vance's Richardson Likes the Market, Not 'Four-Letter' Stocks

Looking for a large-cap growth fund with the tax efficiency that rivals an S&P 500 index fund but isn't overly concentrated -- read overly exposed -- to the biggest 10 or 20 companies in the index? Duncan Richardson has just the fund for you.

Richardson is the long-time skipper of the Eaton Vance Tax-Managed Growth fund. The fund has been an astonishing success on all fronts. Its 10.23% average annual return over the past 10 years puts it in the top 6% of all large-growth funds, according to Morningstar. Richardson has managed those higher returns with lower risks, thanks to a diversified portfolio of more than 600 companies, none of them making up more than 2% of the fund. The fund is also a winner on the other side of the equation: taxes. A recent Lipper study found that investors lose as much as 25 cents of every dollar of their annual returns to Uncle Sam -- as Richardson says, "We think you should keep the quarter."

In this week's 10 Questions, Richardson discusses a host of topics, among them: how the fund's conservative approach to growth has meant long-term success. How the war on terror may be with us for the next two decades, but it should keep us away from equities. How this market looks poised to recover. And how certain companies, such as the house that Mickey built, look undervalued.

If you want to learn how Richardson and Eaton Vance have let you keep the quarter while making plenty of extra bucks compared with their peers, read on.

1. What is your philosophy on growth investing, keeping in mind the tax efficiency the fund strives to achieve? And how are you putting it to work these days?

The basic philosophy is growth at a reasonable price [GARP]. Valuation plays an important role in investing. With a GARP approach, you are, by definition, aware of the risks of overpaying for growth.