Despite the headlines, now is not the time for panic. At a time when investor uncertainty is high, individuals considering throwing in the towel may be better served by letting someone else steer the ship.
In my 20-plus years of service to the financial industry, I have never seen a time like this. Most troubling to me is the high degree of uncertainty with respect to valuations, economic direction and market performance.
Exhibit 1 is Bear Stearns (BSC). Not a week after declaring all is well, the CEO of the last independent Wall Street investment bank watched his company sold for pennies on the dollar.
If the CEO is that confused about things, how is an individual investor to know up from down?
They can’t, and that’s why investors need to consider using mutual funds to augment or supplant their own decisions regarding stocks and bonds. Has there ever been a better time to realize the benefits of mutual fund investing?
The answer is no, and for those looking for a good place to start, try our own Dan Wiener’s The Independent Adviser for Vanguard Investors.
The mutual fund industry is full of many options, and Dan Wiener knows all of the ins and outs. In his opinion there is no better fund complex than Vanguard due to its track record of performance, managerial expertise and low cost structure.
Maximize Returns With Mutual Funds
In his newsletter, Dan shows readers how to use Vanguard funds to maximize returns while minimizing risk. He offers a variety of portfolios, all using Vanguard funds, for every type of investor profile.
I recently perused his Buy List and discovered a recommendation that really makes sense to me. Specifically, Dan recommends the Vanguard Health Care Fund (VGHCX) for his growth, conservative growth, and income funds.
With the economy in disarray, the health care space appears to be poised to offer safety and growth at the same time. As the baby boom generation ages, this space will require more services with more benefits.
At the same time, health care will do well regardless of the health of the economy. Recession or not, dollars will be spent on health care because of need rather than desire. That means companies in this space can enjoy the benefits of both safety and growth.
The Vanguard Health Care Fund is a $13.9 billion fund that has a five-star rating from Morningstar. Managed since 1984 by Edward Owens, the fund seeks long-term growth in capital by investing in pharmaceutical firms, medical supply firms and companies that operate hospitals and other health-care facilities.
Although the fund is down just over 5% in 2008, that number is outperforming the market by a wide margin. I expect that trend to continue for the remainder of the year.
Buying a mutual fund with long term managerial experience is just the tonic for panicked investors. With a huge asset base, VGHCX can invest in a large number of companies achieving broad diversification.
Investors acting independently, unless you are Bill Gates or someone with huge wealth, cannot diversify in the same way. More importantly, buying funds takes individuals out of the driver’s seat.
If you are a fearful investor, why risk making a mistake? Let the professionals guide your portfolio and let Dan Wiener show you how with less risk. That professional will be less likely to make a mistake based on emotion or fear.
That makes rational sense to me!
Sign up today for your own 6-Month RISK-FREE subscription to The Independent Adviser for Vanguard Investors and put Dan’s Model Portfolio to work for you! You can read the full interview with Vanguard Selected Value’s Jim Barrow and Mark Giambrone in the March 2008 issue. Simply accept a no-risk trial to The Independent Adviser for Vanguard Investors today!
