The three managers of Akre Focus Retail Class (AKRE) liken their investment process to a “thre...
An All-Star Fund Portfolio
07/22/2013 7:00 am EST
While there is no one-size-fits-all investment portfolio for every investor—especially for these unusual markets with hyperactive central bankers—we’ve found seven best-in-class funds balanced across a number of asset classes for growing and protecting your portfolio, says Bill Hall of Money & Markets.
The managers of these funds are some of the finest and well-respected investors in the world. They directly manage the portfolios of some of the world's wealthiest families and institutions. They are truly all-star investors.
Mutual Fund #1 — 10%
SIT Quality Income Fund (SQIFX)
SQIFX provides the safety of short-term US government securities along with a modest monthly cash yield of about 1.3% (annualized).
Although the expected total return will come mostly from the current yield, it should provide stability in an uncertain market and a store of buying power when market prices become more reasonable.
Mutual Fund #2 — 15%
T. Rowe Price Floating Rate Fund (PRFRX)
This fund offers a monthly cash yield of 3.2% (annualized) with the opportunity for increases. Since the fund invests primarily in corporate floating-rate securities, the yield will adjust as market interest rates change.
And this holding should provide some downside protection to your overall portfolio if the equity markets head south.
Mutual Fund #3 — 25%
Jensen Quality Growth Fund (JENSX)
Here the managers seek long-term capital appreciation by investing in a group of carefully selected high-quality US companies that have a global distribution network. Holdings include: PepsiCo (PEP), United Technologies (UTX), and Omnicom Group (OMC).
Mutual Fund #4 — 20%
SIT U.S. Dividend Fund (SDVSX)
The fund pays a base dividend of about 1.4%, which should provide a downside cushion when stock markets fall.
Mutual Fund #5 — 15%
Tweedy Browne Global Value Fund (TBGVX)
Here you can invest in a fund that holds high-quality, dividend-paying foreign companies leveraged to potential growth in emerging markets.
With the European markets currently stressed and out of favor, there is the contrarian opportunity for profits as price-to-earnings multiples expand on the other side of the Atlantic.
Mutual Fund #6 — 10%
Harding Loevner Emerging Markets Fund (HLEMX)
HLEMX invests directly in emerging markets that have the fastest-growing economies in the world, such as Mexico, Taiwan and Russia. And it's expected that rapid earnings growth in these regions will propel this fund upward.
Mutual Fund #7 — 5%
SPDR Gold Trust (GLD)
You should also consider including a fund that serves a dual purpose: Protection in the event of a financial crisis and a hedge against inflation, should it suddenly appear. In both instances, increased demand for gold should drive prices higher.
Of course, the specific allocation targets I give are only suggestions. The amount you put in each will depend on your financial situation, risk tolerance, and time horizon.
Overall, this suggested seven-fund portfolio provides protection against the twin threats of inflation and deflation, with PRFRX and GLD defending against both rising interest rates and a slowing economy. JENSX, SDVSX, TBGVX, and HLEMX are all well-positioned to move upward should the market continue its ascent.
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