Morningstar Advisor - April/May 2012 - (Page 24)
Four for the Core
Russel Kinnel, Morningstar’s director of mutual fund research, recently picked out four core funds that are great long-term investments and fit nicely in IRAs or plain old taxable accounts.
FPA Crescent FPACX This is a great fund run by “free-range chicken” Steve Romick. Romick has a lot of flexibility, though you shouldn’t view this as one of those “one and done” funds that gives you a little of everything. Rather, Romick uses his flexibility to invest where he believes there’s a strong risk/reward profile or to simply sit on cash when the opportunities are too limited. Over nearly 20 years at the fund, he’s consistently curtailed losses in down markets while producing solid returns in rallies. FPA said the fund entered 2012 with 19% in cash, 65% in equities (one third of which are foreign), and a 2% short position in equities. PIMCO All Asset All Authority PAUDX This fund makes use of PIMCO’s wide range of funds to allocate among a slew of asset classes. Rob Arnott seeks to find undervalued asset classes while steering clear of those in danger. While his is a very different fund from FPA Crescent, it too places a premium on defense. (The institutional PAUIX shares can be accessed for $100,000 in some fund supermarkets.)
Cerulli Says: Advisors Plan on More Planning
Advisors anticipate extending comprehensive financial-planning offerings to more clients by 2013, while also increasing their use of modular advice. Overall, advisors are expressing an interest in increasing their goal-based relationships in an effort to broaden their metrics beyond investment performance. The proliferation of financial-planning tools has allowed advisors to easily document and track the goals, projections, and action items from planning sessions.
Percentage of Clients Receiving Modular or Comprehensive Planning Advice, 2011 vs. 2013
2011 Planned for 2013
Comprehensive ﬁnancial planning
Modular (issuefocussed) planning
Modular advice with no formal documentation
No ﬁnancial planning services
Source: Cerulli Associates, in partnership with Morningstar and the Financial Planning Association
Dreyfus Appreciation DGAGX This fund is a wonderfully consistent patient investor in high-quality stocks. Subadvisor Fayez Sarofim runs a very low turnover strategy that emphasizes finding companies with brand power at a reasonable price. So, Philip Morris International PM (though it also owns Altria MO), Apple AAPL, Coca-Cola KO, and Procter & Gamble PG dominate the portfolio. In addition, as is required of Houston-based investors, the fund has a large slug of big energy names such as Exxon Mobil XOM and Chevron CVX. Dodge & Cox International DODFX This is another standout to own for decades.
It has low costs, stable management, and a sound strategy. Year to year, its value style isn’t really thrilling, yet its 10-year return of 9.5% annualized bests 98% of its peers’. The fund had an off year in 2011, but Dodge has a history of rebounding strongly from weak calendar-year performances.
Morningstar Ratings, but received “Neutral” Analyst Ratings in Morningstar’s new forward-looking measure. Especially for investors used to screening based on stars, a seemingly conflicting Analyst Rating should serve as a warning to dig deeper into reasons the future may not be as rosy as the past. T. Rowe Price Growth Stock PRGFX A late 2007 manager change on this fund illustrates one of the classic instances when screening on star performance may fall short of telling the whole story. Portfolio manager Robert Bartolo has been managing this fund only since then, so the majority of its 4-star rating was achieved under the
Stars Can Be Deceiving for These Funds
Morningstar fund analyst Janet Yang recently looked at mutual funds that had 4-star
24 Morningstar Advisor April/May 2012
Table of Contents for the Digital Edition of Morningstar Advisor - April/May 2012
Morningstar Advisor - April/May 2012
Letter From the Editor
We’re Too Smart
How Do You Use Alternatives?
Taking the Lead
How to Find Economic Moats
The Beauty of Currencies
No Clarity on Bonds
Four Picks for the Present
Performance Chasing, Evaluated
Technology’s Slim Pickings
How Much Is Enough?
The Fear Bubble
Three Traits of a Successful Long-Short Equity Manager
Why Absolute-Return Funds Fail to Deliver
An Economist’s Response to Crises
Undiscovered in Plain Sight
Untangling ETF Tax- Efficiency Myths
Central Banks Driving the Gold Rush
U.S. Industrials Could Add Some Magic to Europe-Weary Portfolios
No-Hesitation Allocation Funds
Our Favorite Mutual Funds
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
The Greatest Story Ever Told
Morningstar Advisor - April/May 2012