Last month we purchased Fidelity Limited Term Bond (FJRLX) in our model portfolio. Part of our strat...
3 Funds That Fit Your Plan
09/01/2011 1:50 pm EST
Actively managed funds have a place in any investor’s portfolio, says Russel Kinnel of Morningstar FundInvestor, who shares his recommendations for either the aggressive, global, or conservative investor in this exclusive interview with MoneyShow.com.
Some people are saying with all the volatility that you shouldn’t be stuck in an index fund; you should seek an actively managed fund. What do you think?
You know I really like both actively managed funds and index funds. I think over the long haul you’ll still do well either way. I think both groups can do a good job for you.
Right now stocks are getting a little cheaper, so I think either one can do the job for you and really in my own portfolio I own a mix of both; we recommend both. I think it’s a matter of finding good, low-cost, well designed funds, whether active or passive.
The low cost is what everybody looks at, we want to eliminate or at least reduce the fees. Do you have any ideas of mutual funds for the long-haul investor now?
Oh sure. One of my favorites is Prime Cap Odyssey Aggressive Growth (POAGX). This is one of the more, as the name says, aggressive, so it’s not quite a core holding.
But Prime Cap is one of the best growth investors out there. They’re based in Pasadena and they really do thorough, in-depth research. Not all growth managers do, but they’re one of the best, and they invest in an aggressive mix of small- and mid-cap stocks, so it’s a long-term holding. I really like that fund.
Wonderful. Do you have something for maybe those who don’t want to be as aggressive?
Sure. A tamer play that I like is Vanguard Dividend Growth (VDIGX), run by Don Kilbride of Wellington Management. I like the fund because it’s a very low-cost fund, but also actively managed.
Kilbride looks for dividend payers that not only have a dividend today, but have the potential for building that dividend, growing that dividend, and that means you’re looking for healthy balance sheets. In times like this and in 2008, healthy balance sheets generally mean better performance and a more stable company, so I like the defensive nature of that fund.
Do you like staying with US equities, or do you see anything internationally that’s attractive?
Oh no, I think you definitely want to diversify across the world. One of my favorites is Dodge and Cox International (DODFX). It’s just an outstanding core international equity fund. Kind of a mix of value and growth characteristics, but very long-term focused.
They’ve done a very good job over past years, and I think it’s a really good fund that because it’s so stable. Dodge and Cox as managers almost go anywhere, so it’s a very stable firm. It’s a fund you can buy, hold, and ten years later come back and see how you’ve done.
Didn’t recently they get hurt because of the Euro crisis? I guess most all international funds suffered from that.
That’s right, they have a very good record, but 2008 was not a good year for them, even relative to other funds. Obviously, everyone lost money in 2008, but they had some European banks and some other financials that did not do well.
So they definitely made some mistakes, but I think every active manager makes mistakes—even Warren Buffett makes mistakes. You have to look at that in perspective. Over the long haul, they’ve done a very good job.
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