Now more than ever, America’s employment situation makes knowing your mutual funds and other retirement options an absolute must.
According to the last published figures from the Bureau of Labor Statistics, the average worker stays at his or her job for about 4.6 years. For workers in management and professional occupations, the average tenure is 5.5 years.
With so much transition in today’s workplace, it is clear most of us will not be receiving a 40-year service award or a fat pension based on decades of service. This underscores the critical importance of funding and growing your own nest egg through your 401k as well as IRA contributions and taxable investments in well-managed mutual funds that you can control and manage successfully.
Here are five solid, no-load fund choices that use fundamental analysis to give investors an edge:
Mutual Fund #1: PrimeCap Odyssey Growth (POGRX)
The PrimeCap Odyssey Growth (POGRX) is a solid choice for a “core” fund to anchor a portfolio. This large company growth fund uses a team approach to find companies that are growing, but sell at reasonable valuations.
This $3.8 billion fund is heavily committed to the healthcare sector, with a 42% stake in these names. Technology stocks are also prominent and comprise 27% of this portfolio. Recent top holdings for the fund include: Seattle Genetics (SGEN), Amgen (AMGN), Immunogen (IMGN) and Biogen Idec (BIIB).
Patience is the key here — with annual turnover of 10%, making this a fine choice for taxable accounts with this low-turnover approach acting to minimize taxable distributions. POGRX was up 39.3% last year and has gained an annualized 21.4% over the past 5 years, placing it in the top 17% of its Morningstar peer group.
All PrimeCap-managed funds within the Vanguard Group are now off-limits to most new investors. However, this fund is open to new monies and closely resembles the closed Vanguard Capital Opportunity (VHCOX) which has a super long-term record.
A reasonable expense ratio of just 0.65% annually, or $65 for every $10,000 invested, adds to this fund’s appeal.
Mutual Fund #2: Artisan Global Value (ARTGX)
Going with a global approach to large-cap investing, Artisan Global Value (ARTGX) is a smart way to gain exposure to compelling businesses throughout the world. Managers Daniel O’Keefe and David Samra have the mandate here to shop the world — but actually they are quite selective in this portfolio.
ARTGX usually holds 30 to 50 stocks and currently U.S. based companies are 56% of the fund. The managers also see value in Europe — with a 37% stake in firms benefiting from slowly improving economic conditions.
Have you noticed that business news now contains almost no coverage of European debt woes? While these problems may not be solved, they are better, and this fund is a good way to participate in this recovery in a tactical way. Recent top holdings include Oracle (ORCL), The Bank of New York Mellon (BK), Microsoft (MSFT), Arch Capital Group (ACGL) and 3M (MMM).
Fund expenses are on the high side at 1.52% for this $1.4 billion fund, but performance from this management duo has been strong. The fund was up 31% last year, and has gained an annualized 19.6% over the past five years, placing it in the top 12% of its Morningstar peer group.
The same managers oversee Artisan International Value (ARTKX) which is closed to new investors, but is ranked in the top 1% of its Morningstar category over the last decade.
Mutual Fund #3: Fidelity Low-Priced Stock (FLPSX)
Fidelity Low-Priced Stock (FLPSX) continues to defy gravity with assets of over $31 billion in this mid-cap blend fund. Manager Joel Tillinghast leads a team that targets stocks priced at $35 per share or less. This leads him and his associates to medium-sized firms that often fly under the radar of Wall Street and its legion of analysts.
For the most part, midcap stocks are not understood or followed as closely as large-cap household name businesses. This creates opportunity for good stock pickers such as Tillinghast, and shareholders have benefited from his leadership since 1989. The fund’s 10.5% annualized return over the past decade places it in the top 7% of its Morningstar category.
FLPSX is large, holding more than 800 stocks at present. Consumer discretionary names make up 25% of the portfolio — with technology names accounting for 19% of assets. Recently, top holdings included UnitedHealth Group (UNH), Seagate Technology (STX), Best Buy (BBY), Ross Stores (ROST) and Microsoft. You even get some exposure to foreign stocks, as 14% of the fund is in Europe presently.
Again, this is a manager that trades infrequently, with turnover of just 11% over the past year. Fidelity charges a reasonable 0.80% in expenses, or $80 for every $10,000 invested.
Mutual Fund #4: FPA Crescent (FPACX)
Balance is a key component of a successful portfolio, making FPA Crescent (FPACX) a fund to consider. Manager Steve Romick has been in charge here since 1993 and offers investors a way to participate in the equity markets in a lower risk manner. Preservation of capital has always been a cornerstone of this fund — which has a wide mandate.
Romick can invest in practically any asset class and can even practice short-selling of stocks (betting on a decline in price). In practice, however this is done on a very limited basis. This $14.1 billion fund has evolved over time, and now emphasizes large-cap stocks for the equity portion of the fund. In the past, FPACX was unique for investing primarily in small- and midcap stocks for equity exposure.
Recently, just 51% of the fund was invested in the stock market—reflecting the lack of compelling valuations being uncovered of late. Nonetheless, the fund was up a remarkable 21.9% last year and remains a solid choice for conservative investors looking for equity exposure in a less risky package. Recent top holdings include: Microsoft, Oracle, AON (AON), CVS Caremark (CVS) and Thermo Fisher (TMO).
Over the past decade, the fund has advanced 8.6% on an annualized basis — good enough to rank in the top 2% of its Morningstar category. Mr. Romick and his team were recently nominated for 2013 U.S. Allocation Fund Manager of the Year by Morningstar in recognition for this solid performance. Fund expenses run 1.16%, or $116 for every $10,000 invested.
Mutual Fund #5: Loomis Sayles Bond (LSBRX)
It is clear that many retail investors are warming up to the idea of allocating more assets into the equity market — but let’s not forget that diversified portfolios need bonds to add balance. Loomis Sayles Bond (LSBRX) remains a remarkable fund in the hands of an experienced leader.
Dan Fuss leads a team that oversees this $21.9 billion multi-sector bond fund. This is not a plain-vanilla bond fund — you will find corporate bonds mixed alongside debt from Canada and Norway. About 20% of the fund is in high-yield debt currently, with 20% allocated to non-U.S. dollar-denominated bonds. Recent top holdings include: Canadian government (2.5%), Intel (3.25%), Norway government bond (5%) and Ford (4.25%).
This eclectic mix works quite well, with the fund up 5.5% in 2013, compared to many bond funds that were flat or slightly down last year. Over the long haul, the fund has been a winner as well, growing at an annualized 7.5% over the past decade and placing in the top 7% of its Morningstar category over the period.
The fund features an attractive 4.7% yield over the trailing 12 months and the current 30-day SEC yield is 3.2%. Recently, the fund’s bond portfolio had an average maturity of 8 years and a duration of 5.1 years. This is a fund that is a bit unconventional, yet continues to be a compelling choice for those looking for solid active management in a fixed income portfolio.
Like what you see? Sign up for our Retirement Insights e-letter and get retirement investment advice delivered to your inbox every Saturday morning!
Bill Wysor is the editor of The Relevant Investor. As of this writing he was long VHCOX, FLPSX, FPACX and LSBRX.