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4 Funds That Deliver Now and Beyond

08/09/2011 11:30 am EST

Focus: FUNDS

Jim Lowell

Senior Partner & Chief Investment Strategist, Adviser Investments

While Washington and Wall Street both try to figure out how to steady the ship of state, it pays to set a course by some constant stars, writes Jim Lowell of Fidelity Investor.

We certainly can’t stop spending outright any more than we can keep on spending willy-nilly. We can’t not consider asking the biggest and most profitable businesses to pay marginally more in taxes (at least the equivalent to what they pay in political donations), just as we can’t disregard the tax of illegal immigration on our overall economy, healthcare, and educational systems.

We can’t not ask that tax codes be dramatically simplified, so that loopholes become nonexistent for the upper echelon who can afford to hire people to help them avoid paying their due, before we ask for current taxpayers to pay more.

We can’t blithely condemn nearly one-third of our citizenry to government doles that keep them physically, psychologically, and generationally on a government treadmill, any more than we can afford to not more broadly and meaningfully fund trade schools and the skills and jobs they engender.

Asking more of each and every citizen, rather than spending more on a politically defined minority of them, means we’ll have the means to support those who truly can’t support themselves, and present a future that is as promising as we can make it.

My Market Outlook
If that’s the political gewgaw as I see it, my market outlook is borderline disjunctive.

I do not see the end of better days in the earnings reports that are present and accounted for. Instead, I’m seeing companies across most sectors, and consumers and in the growing emerging-market countries, maintaining reasoned spending commensurate with uncertain times. That’s a far cry from a no-growth psychology.

So despite confidence numbers that reflect daily headline fears, the spending behavior of individuals and companies reflects a sense that they will be in business for years and generations to come. The markets reflect this Ur-sense of optimism, rising against all the prevailing fears and surprising those who have made the assumption that as go the headlines so go the markets.

I also know that there’s suddenly a lot of talk about "tail risk" and investing for catastrophic events, as if the world could end tomorrow.

Ignoring the meltdown and subsequent rebound of the past three years (which taught us the benefits of time in the markets as opposed to market timing), and advocating abandoning your long-term objectives and proven investment discipline based on near-term fears and hearsay, in order to jump in a lifeboat that has never made a safe passage in the middle of a wide sea doesn’t make sense...but it can feel like the right thing to do, if the timing is right and the rumor of a sinking ship is gripping enough.

Me? I think, against all the forecasts for the worst of times, the market will deliver a 10% to 15% gain before year-end.

Maybe my optimism is blinded by what I haven’t seen. I can honestly say that I have not watched one Sunday talk show or evening gabfest for the past three weeks.

As the mood soured and the modus operandi of both parties zeroed in on political not economic gain, I opted out of the kamikaze chair and, instead, went fishing in the wild blue yonder.

Going beyond the visible horizon isn’t child’s play. I know that the fanciest navigation equipment in the world can’t guarantee safe or profitable passage, let alone catching rather than fishing.

Experience matters. Knowledge counts. Judgment is key. So, before I head back out on the water, here’s one more word of fishing wisdom: if it smells fishy, don’t buy it!

My monthly “Best Buy” funds are specifically directed to investors seeking the best one or two Fidelity funds to add to their existing Fidelity-only, or all fund family portfolio.

NEXT: The Opportunities


Tactical Opportunities
How to game a broken system? Play defense. Select Consumer Staples (FDFAX) and Select Healthcare (FSPHX) look like a cure for what continues to ail our markets.

Dividend Growth (FDGFX) is the best defensive growth fund our money can buy. High Income (SPHIX) is a bond alternative that helps us maintain a livable yield, while reducing stock-market risk and interest-rate risk on the bond side of its coin.

Investors seeking one equity fund should consider Dividend Growth. It makes sense today for a defensive stock position and will still make sense tomorrow.

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