Quick -- what's the absolute last thing you want to do this December?
For me, ranked right up there with wrapping yet another
, may well be that eat-your-spinach edict of financial planners: end-of-year investment planning.
My apologies to those of you who find tax talk tantalizing, but ugh! I mean, I know I need to do this. Yet lugging out the mutual fund statements and
reports is akin to running out to
on Christmas Eve.
Still, this much-maligned activity is critical. I know that even if I don't like it, I can save some money by taking losses to try to offset gains.
This always sparks a huge debate (nice name for fight) in my family. My husband Larry and I don't always agree on which funds are doing what we want them to do.
I thought you might like to see some of my thinking. Of course, this peek inside our portfolio should definitely not be considered investment advice. My time horizon, risk tolerance and mix of other investments are no doubt different from yours.
That said, here's the bottom line for me on a few of my funds: keepers, losers and undecided.
White Oak Growth
This one's easy.
Since I bought the large-cap growth fund at the beginning of 1998, it's been a clear winner. Up 40% in 1998, gaining about the same so far this year. Yes, manager Jim Oelschlager keeps just a small number of favorites in the fund -- his stock holdings usually total two dozen or fewer -- and they tend to be in volatile sectors, namely financials and tech. But I have a lot of faith in his stock-picking ability, and his long-term record is one of the best in the business. White Oak Growth is near the top of the charts with a five-year average return of nearly 40% a year. Plus, expenses (at 1% a year, well below the industry average) and turnover (a measly 6% a year) are quite low.
When we picked this up, we wanted a diversified manager who could move in and out of risky sectors with agility. Doesn't hurt that Akron, Ohio-based White Oak is a long-term holding that has produced superior short-term results.
You could have accused me of chasing performance when I first got into this fund. After a spectacular 1996, when Artisan International delivered an outsized return, beating the
index by better than 10 percentage points to rank No. 1 among foreign stock funds, I certainly wasn't the only one betting money on manager Mark Yockey. But that phenomenal performance soon became merely mediocre. In 1997, a 3% gain pushed Artisan to the bottom half of its category. Not surprisingly, I heard "I told you so!" from a lot of readers -- and my husband, who worried that Yockey was a one-year wonder.
I held my ground though. I liked Artisan's strategy of investing in all sizes of companies with good growth prospects. A couple of great calls convinced me early on, despite the dismal time he had two years ago. Yockey caught the rise in Europe long before most other international managers and has been a long-time believer in telecom.
It shows in the numbers. Artisan International is up 63% so far this year after a strong 1998 delivered 32%.
And I can't ignore the fact that the annual expense ratio has actually gone down -- to 1.38% from 1.45% a year ago -- as assets have grown. That's the way things are supposed to work in the fund world -- but rarely do. On that basis alone I might want to throw my support behind the firm, but, hey, I'm not that altruistic. In this case, strong, consistent returns in up and down markets keep this fund in the part of my portfolio where I want some international exposure.
Can't say I didn't give this one a chance. I've long been an admirer of Ken Heebner's experience and style, and stood by the guy known on Wall Street as the "Mad Bomber" through thick and thin. But thin lately has been, well, downright anorexic. Yes, real estate has been a downright dog sector for a while, and visiting a fund with the sins of its sector isn't really fair. But CGM Realty underperformed in relative terms, too -- near the bottom of the category last year.
Yes, long-term results still eclipse those short-term returns -- CGM Realty has a sterling 10-year record. But I'm just not sure we're the aggressive real estate players who should apply.
I'll take the tax loss. But don't you dare say this is an impulsive move. My husband, who wanted out last year, was right, but we held on because I wanted to study for just a few more quarters.
Now, though, enough.
Check out these numbers: 21%, 31%, 27%. Three good reasons to keep Schwab 1000. Those were the annual returns in '96, '97 and '98. Not bad, huh?
I agree. But I'm still thinking of getting rid of this index fund. It's basically a large-cap play with a bit in mid-caps. I've already got plenty of that through the
Vanguard 500 Index fund (which has significantly lower expenses, too).
The main reason I want to rethink this investment is my fault, not the fund's. Whatever seized me to put this in my IRA? This kind of tax-efficient fund belongs in a place where Uncle Sam gets a cut. I should have my more aggressive, high-turnover funds in my tax-deferred accounts.
OK, so the year-to-date 9%-plus sign next to Oakmark Select isn't exactly a selling point for this mid-cap value fund. But that's not the number that upset my husband, who wants no more of this fund. He points instead to a big capital gains distribution this year, equal to about 17% of the fund's net asset value.
That's clearly a consideration -- but mainly for investors who bought in at the beginning of the year. We did not, and have enjoyed nice returns from the fund. Moreover, the distribution came when manager Bill Nygren sold several big positions in his concentrated fund --
among them. He did so because he was sure the money could be better redeployed in substantially cheaper stocks.
I vote to stick by Nygren, who is an extremely talented stock-picker in the value camp. (When's the last time a value fund returned 55%? That was Nygren's gain two years ago.) He is consistently a top performer among peers, and despite the tax hit we took this year because of him (90% of which was in long-term capital gains), I still say this is the best bet for value exposure. (My husband, though, still needs to be convinced.)
There it is. Clearly, we still have some more "debating" to do in my house, but at least we've made a start. But I'm still surrounded by countless unwrapped Pokemons.
Brenda Buttner's column, Under the Hood, appears Thursdays. At time of publication, Buttner owned shares of the White Oak Growth, Artisan International, CGM Realty, Schwab 1000, Vanguard 500 Index and Oakmark Select funds, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or funds. While she cannot provide investment advice or recommendations, Buttner appreciates your feedback at
As originally published, this story contained an error. Please see
Corrections and Clarifications.