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Mutual funds for dummies - Tyson E

Tyson E. Mutual funds for dummies - Wiley publishing , 1998. - 425 p.
ISBN 0-7645-5112-4
Download (direct link): mutualfundsfordummies1998.pdf
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Schwab's index funds
Although their expenses are higher than Vanguard’s, Schwab’s index funds are worth mentioning for their tax-friendliness and low initial minimum requirements ($1,000 for non-retirement accounts, $500 for retirement accounts).
The Schwab 1000 fund invests in a Schwab-created index of the 1,000 largest publicly traded U.S. companies. Its expense ratio is 0.5 percent. The Schwab International Index invests in another Schwab-created index of 350 large-company stocks outside the United States. The expense ratio is 0.6 percent.
Both of these funds are tax-friendly: Whenever they need to sell securities because of changes in the index or shareholder redemptions, they make sure to offset capital gains with losses. To achieve this result, these funds have been given the flexibility to deviate occasionally from index weightings by small amounts.
“Tax-friendliness” is only a concern for non-retirement account investing.
For retirement accounts, Vanguard’s lower expenses give it the definite edge. ® 800435-4000.
Recommended U.S.-focused stock funds
This section focuses on the better actively managed funds that invest primarily in the U.S. stock market. I say primarily because some “U.S.” funds venture into overseas investments.
Chapter 9: Funds for Longer-Term Needs: Stock Funds 225
Of all the different types of funds offered, U.S. stock funds are the largest category. To see the forest amidst the trees, remember the classifications I cover earlier in the chapter. Stock funds differ mainly in terms of the size of the companies they focus on and whether those companies are considered “growth” or “value” companies.
Some of these funds may invest a little overseas. The only way to know for sure where a fund is currently invested (or where the fund may invest in the future) is to ask. You can start by calling the 800 number of the mutual fund company that you’re interested in. You can also read the fund’s annual report (which I explain how to do in Chapter 4). A prospectus, unfortunately, won’t give you anything beyond general parameters that guide the range of investments; it won’t tell you what the fund is currently investing in or has invested in.
I’ve tried to order these funds from those that are more conservative to those that are more aggressive.
foodqe Si Cox Stock
Another of the fine but few funds offered by Dodge & Cox, this fund focuses on large-company value stocks. Unlike most U.S. stock funds today, it does little trading, often less than 10 percent of its portfolio annually. Like the Dodge & Cox Balanced Fund, this fund is managed by a team and does not try to time the markets. Its annual expense ratio is a low 0.6 percent.
Initial minimum investment is $2,500 ($1,000 for retirement accounts).
® 800-621-3979.
T. Route Price Spectrum Groutth
T. Rowe Price offers a number of good stock funds, both U.S. and international, and this fund of funds offers a simplified way to invest in them. The U.S. stock funds in this fund cover the spectrum of company sizes. The fund also offers an international stock fund and the New Era fund, which invests in natural resource stocks and provides a good inflation hedge. Typically, international stocks comprise about 30 percent of this fund’s holdings.
This fund of funds is managed by regular meetings of a committee made up of fund managers within the company. Slight changes in allocations among the different funds are made based on expectations of how a particular sector will fare in the future. The expense ratio of the funds in this fund generally averages out to 0.9 percent, and there’s no additional fee charged for the fund’s packaging. Minimum initial investment is $2,500 ($1,000 for retirement accounts). ® 800-638-5660.
226 Part II: Establishing a Great Fund Portfolio
What to do about your Mutual Qualified, Shares, and Beacon fund holdings
In the first edition of this book, I recommended three Mutual Series funds: Mutual Qualified, Mutual Shares, and Mutual Beacon. The excellent track record of these funds is largely attributable to the manager of all three — Michael Price. He has taken the concept of value investing to the extreme, often investing in "turnaround situations": companies that are on the ropes and even in bankruptcy. Not as dangerous as it sounds, the strategy has edged out the markeL averages over the past decade plus - no small feat in the mutual fund business.
However, in 1996, Price sold his funds to the Franklin/Templeton fund family. Although Price
continues to manage all three funds, I no longer recommend them to new investors. Franklin is a load fund family and has attached front-end sales charges to the purchase of these funds and has also jacked up the annual operating expense ratio. High fees like this harm a fund's performance.
I still mention these funds in case you already own them. For existing shareholders, the funds remain no load and have retained the older, lower operating expenses. As long as the funds continue to perform well, holding them is fine.
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