Analysts' picks may not fit all
Mutual funds should work with portfolio
Cox News Service
July 24, 2005
ATLANTA — Morningstar's respected analysts work full time checking out and ranking thousands of mutual funds.
Every so often they step out front and name a handful of funds they like so much that they invest their own money in them.
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There are some familiar names — Harbor, Fidelity, T. Rowe Price, Vanguard — and some not so well known, including one of the smallish Bridgeway funds.
"It's worth pointing out that given the buy-and-hold mentality that permeates our investing approach, most analysts were making moves on the margins only," writes Kunal Kapoor on www.morningstar.com. He is director of mutual fund analysis for the Chicago-based fund tracker.
That means no big-money switching from one fund to another, and it often means that purchases are aimed at diversifying a portfolio, Kapoor explained in an interview.
Another notable point is that the analysts are not at all interested in trendy investments.
"We tend to be fairly contrarian in the way we invest," said Kapoor. "We're less than enthusiastic about certain sectors, like real estate, which have had their runs."
Kapoor mentioned one of his personal favorites, T. Rowe Price Global Stock, but only after waving a warning flag: "You have to look at every fund within the context of your own portfolio. Just because an analyst is buying it does not mean you should, too."
His guidelines: Buy funds that fit with what you already own, that match your risk tolerance, and that have experienced management, low expenses and a cogent strategy.
So what are the experts buying? The full report is on Morningstar's Web site, but here's a look at the trends:
Analyst Todd Trubey sold Harbor Capital Appreciation and replaced it with shares in Marsico Focus. On the other hand, several other analysts are buying the Harbor fund.
You just have to remember the old saw: If all the world's experts were laid end to end, they would not reach a conclusion.
Analyst Greg Carlson has made some switches, moving into Masters' Select Smaller Companies and Bridgeway Ultra-Small Company Market.
Carlson has praised the Masters' fund for a "stellar roster of managers" and relatively low investment costs. The Bridgeway fund, recently reopened to investors, has had market-beating results since it was established in 1997.
None of these selections, he noted, was based on hopes for quick gains. "Our goal is to invest with an eye to the long term," Kapoor said. "We're looking at a five- to 10-year frame."
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