Brenda Buttner chatted on AOL MarketTalk on Wednesday, March 8. AOL's MarketTalk is hosted by Sage Online (Keyword: PF Live). As with all chats, this transcript is unedited.

Comment:

Live from New York, NY, please welcome Brenda Buttner, senior columnist, TheStreet.com. Brenda can answer questions about mutual fund investing and trends moving this industry.

Sage Lion:

It's great to have you with us in MarketTalk today Brenda!

TSCBrenda:

Hi everybody! Nice to be back -- fire away!

Question:

Have actively managed mutual funds begun to outperform the overall market and do you see this continuing?

TSCBrenda:

Yes, this is a great question. They ARE over-performing the market, but the question is what market? The S&P they're well ahead, but the Nasdaq, no way.

TSCBrenda:

This points out the problem with benchmarks. A much more relevant question to ask -- is my manager outperforming similar funds -- outperforming his or her peers? That gives you a much more comprehensive sense of performance.

Question:

Telecom and Internet Trust funds, is this something new?

TSCBrenda:

They certainly are hot -- everybody wants to start a sizzling sector fund -- so even value firms are getting into the act.

Question:

Brenda Buttner! I am truly your biggest fan. I can honestly say I've never ever missed one of your fox news shows! Here's my question .. do you think it's a good idea to do tech analysis on mutual funds?

TSCBrenda:

How nice of you! (Tell all your friends to watch, too! 10am, 6pm Saturdays, and 10 am Sundays. Okay, enuf of shameless plugs.) I do not think it makes any sense to do TA on mutual funds. A fund is a collection, a basket if you will, of stocks ...

TSCBrenda:

Charting works with a set subject, such as one stock ... but the effect is muted considerably when you join them all together. Better to stick with the basics if you're buying or selling funds.

Question:

Hi, Brenda. Do think NASDAQ will climb much higher this year? To 6000?

TSCBrenda:

Amazing run, isn't it? Yes, I do think it will climb higher -- not sure if 6000 will be the target, but remember when we thought 5000 was well out of reach? I just think that short term the momentum continues with the Nasdaq stocks and long-term, the revolution in technology will be a boost for many of these high-fliers. As for the Dow, that's another story!

Question:

My sister is a very nervous investor but wants to play an aggressive tech fund with 25% of her portfolio, any suggestions?

TSCBrenda:

It's quite a sign of the times that we consider tech funds and stocks defensive plays these days! Traditionally, you would say to a nervous investor -- go with a value fund or the like. But they simply cannot get out of their slump.

TSCBrenda:

If she is really nervous, though, I would suggest a diversified fund with a manager who has proven he or she can jump in and out of tech nimbly. Maybe White Oak Growth -- also take a look at Firsthand Funds Tech Leaders -- this is a sector fund, but Kevin Landis the manager has a good long-term record.

Question:

Is Jim Cramer a crazy man? Does he have a padded office?

TSCBrenda:

He is a brilliant man with a colorful personality! I enjoy working with him.

Question:

Is the biotech sector overbought? Due for a correction?

TSCBrenda:

Remember that this sector goes from boom to bust to boom again very quickly -- to call it volatile is an understatement. (Anyone who invested in biotech in the early 90s knows that!)

TSCBrenda:

But it still has some steam, I think, mainly because so many of the big drug firms are running out of drugs in the pipeline, so they need to invest in research.

Question:

Brenda .. who do you consider to be the "bruce springsteen" of fund managers today?

TST Recommends

TSCBrenda:

Okay, don't get me talking about the Boss! That is my favorite subject! Truth is, no fund manager can compare -- unless he does a mean version of Thunder Road! :)

Question:

Brends, TSCM is the best commentary site. Why is its stock mired down in the low teens though?

TSCBrenda:

Thanks for the compliment. And know that obviously I own TSCM stock, as I work for and believe in the company. I think analysts just don't quite understand the business model, and there's a very emotional faction of investors who are shorting it.

TSCBrenda:

But I hope that with the fine level of editorial content, the stock will soon reflect that excellence. Who knows, though? I never thought it would be at this level.

Question:

So..should I sell my value funds...?

TSCBrenda:

You may definitely be wondering why you bought them! But if you chose your value managers carefully, they will eventually have their day in the sun again. Of course, the question is when?

TSCBrenda:

It's been a while. However, remember when it seemed like the S&P500 Index funds could do no wrong? Look where they are now ...Diversification pays off ... but you may need to be patient for a while longer.

Question:

Brenda, Hi! I am an early retiree, living off about 5% of my portfolio (which is all of my assets). I know that should work, but I am terrifically nervous! What is your advice to achieve Zen calm in this hectic market?

TSCBrenda:

Zen calm??? Try a yoga position! :) Seriously, you are asking the right question -- and only you can answer it. If you are nervous now, you may want to pare back some of your more aggressive investments, such as sector funds, etc. If you can't sleep at night, there's a problem. Remember though that the point of investing is not to avoid risk, but to manage it. There is a big risk in opportunity cost, too.

Question:

What are your favorite socially screened funds?

TSCBrenda:

Honestly, I'm not a big fan of these because often the criteria can be so narrow -- many of the companies that are not included actually have good records on other scores -- such as how they treat employees, etc.

TSCBrenda:

But the Domini group seems to take this seriously and has had a good track record. I prefer to invest my money, then direct the money I want to charity of my choice rather than going to a socially responsible fund.

Question:

Do you think we may be entering the early stages of a bear market?

TSCBrenda:

Depends on what you're watching. The Dow clearly is in correction and may be headed that way. When "basic, boring" stocks such as P&G, which used to be the bluest of blue chips, take a 30% tumble in one day, you know there's trouble.

TSCBrenda:

But the other parts of the market -- namely technology, technology, technology -- I think will hold up for some time.

Question:

What has happened to index funds?

TSCBrenda:

Index funds are doing exactly what they're supposed to do -- mirroring the market. The issue is -- which market? The S&P funds don't look so hot these days, when compared to performance in the late 90s, because the S&P isn't doing that well compared to the Nasdaq.

TSCBrenda:

But take a look at the Total Stock Market funds -- they are doing better now -- even though everybody thought they were inferior to S&P funds -- because small cap is paying off. Another sign that diversification does ultimately work in the end.

Question:

Speaking about value funds, what about Oakmark?

TSCBrenda:

I think Bob Sanborn is a fine manager, but anyone with Philip Morris in his portfolio has suffered recently. (Actually, for the past few years.)

TSCBrenda:

Plus, I imagine that the flow of funds out of Oakmark has meant some selling of stocks for redemption. Still, if you want a good, disciplined value manager, he is excellent. You just need a longer time horizon than with a go-go growth fund.

Sage Lion:

Thank you for joining us today Brenda! We appreciate your insights!

TSCBrenda:

Thanks so much -- This was fun as always!!!!