Two Funds to "Grow" With
10/20/2006 12:00 am EST
Daniel Wiener can always be counted
on to introduce new and newly-interesting funds and Exchange-Traded Fund's for
investors. Now, targeting his focus toward growth, he finds two funds, plus an
ETF that have interesting potential...
"Growth Index (VIGRX) has always favored the largest and best-known growth names in the stock market. The difference is that this fund has taken "manager risk" out of the equation, to great advantage over its U.S. Growth (VWUSX) counterpart.
"At inception, the fund tracked a subset of the S&P 500 index, the
S&P/BARRA Growth index, holding less than 150 of the 500 stocks in the
broader index. However, with the switch to the MSCI Prime Market 750 Growth
index, holdings have grown to more than 420 stocks. It remains fairly
concentrated though, with a bit more than 20% of assets in its 10 largest
"A heavy allocation to health care (18%) of assets, technology (over 28%), and consumer non-durables (15%), is standard here. That and the general dissatisfaction with large, name-brand stocks have been the reasons for the fund's underperformance during the past couple of years. While I continue to favor fund managers with the ability to forage in the mid-cap markets, I still believe that we need exposure to large-cap growth so that we can catch any bounce in these shares.
"Note: Growth Index charges a $10 annual fee if your account is worth less than $10,000 and you have less than $50,000 at Vanguard, raising its parsimonious 0.22% expense ratio to 0.55% for someone investing the minimum $3,000. However, the fund has an ETF counterpart, Vanguard Growth (VUG AMEX), with an expense ratio of just 0.11%."
"Like little brother Capital Opportunity, PRIMECAP (VPMCX) is closed and will probably remain so. As with all of PRIMECAP Management's funds, this one is a growth-at-a-reasonable-price, or GARP fund. Its holdings span both mid-cap and large-cap stocks, though by dint of its size, large-caps are contributing more and more to performance.
"Thought the fund currently holds 126 stocks, turnover remains low (12%) and the managers continue to have a high conviction in their top names, stuffing 30% of assets in the top 10, which include long-term holdings FedEx, Adobe Systems, Texas Instruments, and Novartis.
"Because of PRIMECAP's tilt toward larger fare, the fund will do better when large-caps dominate. While new investors can't buy this fund, they certainly can buy its near-clone,PRIMECAP Odyssey Growth (POGRX), which because of its smaller size, is more nimble and has substantially outperformed over its brief history. You'll have to go direct to buy it ( www.odysseyfunds.com)."
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