David A. Lopez wants his clients to learn and do well. That’s why in addition to advising individuals, businesses, and nonprofits on taxation matters, David Lopez & Co. hosts a financial literacy class and offers investment advice. The Philadelphia-based, conservative-minded CPA takes no advisory fee and introduces clients only to investments that may meet their financial desires and needs. “They then take our recommendations to their broker or adviser. We serve as an educator that is not motivated by commissions or fees as the consultations are a part of our tax strategy process,†he explains. Figuring out if, and where, to invest in an election year is a tense exercise, says Lopez; no one knows how it will unfold. The only certainty is that we are all aging–the best time to begin saving for retirement was yesterday.
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Lopez believes that the securities industry’s rollercoaster ride of 2010 and 2011 has ended and that select mutual funds have been strengthening, posting better returns. He offers three mutual fund picks he believes could bolster investors’ portfolios: a small-cap, a mid-cap growth, and a retirement income fund. He likes this trio because they are no-load funds with very low expense ratios, solid histories, and solid management investment styles.
1 T. Rowe Price Small-Cap Stock Fund (OTCFX) The $7 billion fund, trading at about $35 in August, has performed steadily in weak times and has beaten its benchmark–the S&P 500. Over the past five years, OTCFX has never ranked below the top 10% of the up-to 748 funds that are in its category. Lopez says that the no-load Baltimore-based
fund is a 90% domestic stock play, which could make it volatile, but he likes its broad company holdings. He says that the fund’s management doesn’t “focus on one or two major holdings, but has done an excellent job creating an investment that purchases equities in companies that operate in almost every industry sector†including retail, oil and gas, healthcare, consumer, and manufacturing. No single company comprises more than 2% of the fund’s total holdings.One-year return: 18.07%
Three-year return: 18.90%
Five-year return: 5.64%
Minimum initial investment: $2,500
Fee: 0.92%
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2 Meridian Growth Fund (MERDX) This is a relatively small fund with just $2.5 billion invested in small- and mid-sized companies. MERDX invests primarily in a diversified portfolio of dividend-paying stocks focusing on long-term growth of capital along with income as a component of total return. MERDX, located in Marin County, California, was managed by Richard Aster from 1984 until he passed away this February. Lopez says Aster didn’t make many trades, noting that MERDX has provided good long-term performance overall. He adds that in high-performing market cycles, MERDX may earn less than sector leaders, but when the bear appears, it suffers less than more aggressive funds. Lopez says, “I put high value on steady growth that is consistent, as you can utilize a fund such as this as a foundation of your investment portfolio.
One-year return: 13.50%
Three-year return: 17.93%
Five-year return: 6.55%
Minimum initial investment: $1,000
Fee: 0.81%
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3 MFS Lifetime Retirement Income Fund (MLLAX) For baby boomers contemplating retirement, Lopez recommends the Massachusetts Financial Services Co.’s MLLAX fund for its growth potential and its security resources. Lopez favors conservative funds when advising individual investors nearing retirement and thinks that 7-year-old MLLAX could be a perfect match. It has an umbrella strategy that spreads risk and shelter investors, putting money in one vehicle that is comprised of 20 stock and domestic and foreign bond funds, of which the top 10 holdings are managed by Massachusetts Financial Services Co. Lopez recommends MLLAX because of its manager, who has been with the fund since inception. He has “a strategy that focuses on asset allocation and not chasing the hot segments. The fund also focuses on providing a steady stream of income, which is a primary goal of retirees.â€
One-year return:
Three-year return: 6.21%
Five-year return: 4.81%
Minimum initial investment: $1,000
Fee: 0.97%