Funds Worth Your While
There are thousands of mutual funds out there, but who wants to troll through them all for one that suits you? That's why I presented last week's time-saving checklist for investors who would rather spend their time funding -- not finding -- the right mutual fund.
This week, I've put this screening process to the test and unearthed some picks of the litter. As you remember, the five keys are:
Strong performance: beating the appropriate benchmark;
reasonable expenses: less than 1% for large-cap funds, and less than 1.5% for small-cap or mid-cap funds;
minimal turnover: 35% or less, unless the fund is in a tax-deferred account;
low risk: beta less than 1;
experienced management: fund manager at the helm for five or more years.
Keep in mind that this initial examination alone won't flag funds. This checklist can help you to winnow the selections down to a few you can further research yourself. Don't forget to read funds' prospectuses and analyze research reports from Morningstar or Lipper.
Large-Cap FundsThe cornerstone of an individual's asset allocation is traditionally a large-cap stock fund. Depending on your personal investing preferences, you can opt for a large-cap value fund, a growth fund or a combination of the two. On the value side, the (VWNFX)Vanguard Windsor II passed through our screens with flying colors. With a three-year return of 8.19% vs. minus 6.65% for the iShares S&P 500/Barra Value Index ETF (IVE), the Vanguard fund handily outperformed its benchmark. And with a beta of 0.93 and an expense ratio of 0.36%, portfolio manager James Barrow is not taking too much risk or overcharging shareholders. Turnover at the fund is a low 22%, giving it a top ranking by Lipper when it comes to tax efficiency. There has also not been too much turnover when it comes to managing the fund, with Barrow at the helm for close to 20 years. The (PRGFX)T. Rowe Price Growth Stock fund has scored impressive three-year returns for a large-cap growth fund, especially considering that the bear market devoured returns in the first two of those years. The fund's three-year return was 5.75% vs. 3.5% for the iShares S&P 500/Barra Growth Index ETF (IVW). The fund also fared well against its Lipper peer group in terms of fees and tax efficiency, with an expense ratio of 0.74% and a 31% turnover. Morningstar says veteran portfolio manager Robert Smith's ability to "stay a step ahead of the competition is what gives this fund its edge." Other large-cap funds that stood out were (CFIMX)Clipper and (JENSX)Jensen.
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