Wealth Builders

04/29/2005 12:00 am EST


Sheldon Jacobs

Author, Investing Without Wall Street, Five Essentials for Financial Freedom

"There seems to be nowhere to hide," says Sheldon Jacobs. "In our entire database of nearly 1,000 funds, only 35 equity funds managed to break even in March." Here, he offers his portfolio of "wealth builder" funds poised to outperform in a difficult environment.

"Our overall outlook remains the same—a stock market with a downward bias, albeit punctuated with intermittent rallies. We also expect rising short-term interest rates and moderately higher long-term rates. Meanwhile, stocks appear reasonably priced and economic growth is still fairly strong, so earnings will increase this year and probably next. Also, stocks look considerably more appealing than bonds, whose yields pale next to the potential for growth in earnings and dividends from stocks.

"Our Best Buys portfolios remain positioned for a difficult market. Though they offer significant equity exposure, they do so primarily through index funds and lower risk actively managed stock funds. They favor funds that invest in attractively valued, dividend-paying mid-size and large companies. They are generally diversified across many sectors and industries. And within the bond area, we favor high-quality, short-term bond funds."

We note that Sheldon Jacobs maintains various model portfolios to assist investors who are focused on various mutual fund families. However, he also maintains a "Master Portfolio" of best buys, which include holdings from different fund groups. Here, we offer a look at his growth-oriented, Wealth Builder portfolio:

For aggressive growth, he recommends a 20% position in Baron Small Cap (BSCFX). For the growth portion, he recommends a 20% position in Vanguard Total Stock Market Index (VTSMX) and 10% positions in each of Janus MidCap Value (JMCVX), Artisan Mid Cap Value (ARTQX), and Muhlenkamp Fund (MUHLX), as well as a 5% position in Price New Era (PRNEX). For international exposure, the portfolio holds a 5% position in Price Emerging Europe and Mediterranean (TREMX) and a 10% position in Artisan International Value (ARTKX). For the bond portion of the portfolio, Jacobs recommends 5% positions in each of Fidelity New Markets (FNMIX) and Vanguard Short-Term Investment Grade (VFSTX).

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