Dawn Brown has a very methodical approach to choosing mutual funds, no matter what direction the market is headed. She keeps an eye on performance, of course, and leans heavily toward funds that have established a track record of staying far ahead of the pack. She favors thrifty portfolio managers who run a tight ship, keep expenses in check, and who have significant experience in an industry. Brown likes continuity, too: She looks for funds piloted by a manager or team that’s been in place for about five years or longer.
Brown is a senior financial adviser at the New York firm Altfest Personal Wealth Management, where she has worked for almost 10 years, and she holds a certified financial planner’s license. Brown’s specialty is retirement planning, a job that relies heavily on her fund picking skills.
“At Altfest, we take
a value investor’s philosophy–we generally gravitate to undervalued parts of the market,†Brown explains. “Right now, we’re leaning toward investments in large-cap companies. By some reports, the small-cap segment of the stock market is overvalued by as much as 20%. Mind you, we don’t focus on any one portion of the market. That said, we see value in the near term in large company shares.†Brown talked to Black Enterprise about three promising mutual fund investments.Yacktman Focused Fund (YAFFX) is a large-cap value portfolio. The manager, Donald A. Yacktman, has been in charge of the fund’s parent since 1992. His track record is impressive: The fund ranks in the top 1% of its group over the last three, five, and 10 years. We like the fact that the fund limits downside in bear markets yet can hold its own during
bullish periods. In 2008, for instance, Yacktman was down 23% while the market fell 37%. In 2009, the fund had a total return of 62.7% to the market’s 26.5%. The manager runs a small, concentrated portfolio of around 50 stocks and he sticks with his picks: Its portfolio turnover is under 10% a year. Yacktman tends to gravitate to the big names, too, such as Procter & Gamble and PepsiCo. It takes $2,500 for an initial investment in the fund although that amount is lowered to $500 for IRAs.1-YEAR RETURN: Â Â Â 18.40%
5-YEAR RETURN:Â Â Â Â 11.89%
10-YEAR RETURN: Â Â Â 12.99%
MINIMUM INITIAL INVESTMENT:Â Â Â Â $2,500
EXPENSE RATIO:Â Â Â 1.25%
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FPA Crescent Fund (FPACX) is also a value-oriented portfolio, although it gathers up a wide variety of investments–large- and small-cap stocks, foreign company shares, and bonds. Its manager, Steven
Romick, has done a fantastic job as well: The fund ranks in the top 11%, 4%, and 1% according to Morningstar stats for the last three, five, and 10 years, respectively. The manager is a fan of large caps right now, with Aon, Walmart, and Microsoft in the portfolio. At the same time, he has a lot of leeway and can hold cash–which is now just under 20% of the portfolio–until the right opportunities come along. Turnover is relatively low at 32%, as are expenses at 1.17%. The fund’s required initial investment is $1,500 or $100 as part of an IRA.1-YEAR RETURN: Â Â Â Â 15.80%
5-YEAR RETURN:Â Â Â Â 6.47%
10-YEAR RETURN: Â Â Â 9.51%
MINIMUM INITIAL INVESTMENT:Â Â Â Â $1,500
EXPENSE RATIO:Â Â Â Â 1.13%
T. Rowe Price New Asia (PRASX)Â is a good way to gain exposure to the rapid developments in the two emerging markets where almost 60% of the portfolio is invested. Manager Anh Lu took over in 2009, but worked with the previous manager before assuming the top spot. Asia is growing quickly, but we’ve seen instances when the fund is down as a good point to jump in. Take 2008 and 2009, for example. The fund fell 61% during the near collapse of global financial markets, but came back with a 103% gain the next year. The fund is a relatively active trader with a 49% turnover, but it keeps expenses low at 1%. The T. Rowe Price fund requires a first investment of $2,500 or $1,000 for IRAs. Finally, we like the long-term scenario for Asia’s growing economies–China and India.
1-YEAR RETURN: Â Â Â 19.27%
5-YEAR RETURN:Â Â Â Â 17.06%
10-YEAR RETURN: Â Â Â 17.11%
MINIMUM INITIAL INVESTMENT:Â Â Â Â $2,500
EXPENSE RATIO:Â Â Â 0.96%