includes other Oppenheimer funds such as: Discovery (which holds small-company stocks), Main Street (large companies), Quest Balanced (bonds and stocks of large companies), Small- and Mid-Cap Value, and Strategic Income (various types of bonds).
“Joe recommended a few fund families, and we did our own research,” says Karen. “We’ve decided to use Oppenheimer because the company’s funds have been consistent performers.”
Outlaw generally recommends Oppenheimer, Putnam, or American Funds to his clients. “If you’re in those families,” he says, “you can change from one fund to another without having to pay a sales charge.” (There may be taxable gains, though.) In some cases, changing mutual funds makes sense or provides comfort to investors.
“I’m a conservative investor,” says Karen. “When the stock market went down sharply after the Internet bubble burst, I wanted to have everything in bond funds.” Outlaw says he recommended the Comptons keep about 30% of their portfolio in stock funds, rather than leave the market entirely.
“A couple of years ago, the market began to improve, so we started to move their money back into stocks. Now they have about 70%
in stock funds,” Outlaw says. “We’ll probably stay around that percentage, investing most of their money in stock funds, because this year should be a good year for equities.”
WHERE THE VALUES ARE
That’s not to say that Outlaw is bullish on all segments of the stock market. “I pulled my own money out of Oppenheimer Real Asset Fund,” he says. “And I’m advising clients who own the fund to do the same. That fund does well when the price of oil goes up but I think we’ve gotten all the mileage we can from oil price increases.”
Clients in other fund families may try moving out of oil-heavy funds into foreign favorites such as Putnam Voyager, which “has been picking up lately,” says Outlaw, and American Funds’ EuroPacific Growth, which is a “tremendous fund.” EuroPacific, too, has returned more than 24% a year for the last three years.
Outlaw is also upbeat about domestic stocks this year. “Once Ben Bernanke replaces Alan Greenspan as head of the Federal Reserve, interest rates probably will level off,” he says. “That will be a big help for U.S. stocks; small-cap and value funds, which have led recently, still look good, while a lot of technology companies may do well. I also continue to like real estate; the next time I meet with the Comptons, I may suggest they invest 5% to 10% of their portfolio in a real estate fund.”
No matter which funds the Comptons choose, based on Outlaw’s suggestions and their own research, they plan to invest regularly. “For years,” says Keith, “we’ve arranged for automatic investments from our bank account to our mutual funds. That way we don’t think the money is ours to spend.” Such periodic investing, known as dollar-cost averaging, is a proven way to build up fund holdings over the long term at a reduced per-share cost.
In fact, the Comptons are so enthusiastic about mutual fund investing that they’ve already