TAKING STOCK: Am I on the right track?

Dear Mr. Berko:

I'm 45, married and have two children, and I'm worried about my investments. We have $48,000 in savings earnings less than 1 percent, $42,000 in a Roth earning money market and $205,000 in my 401-k; 50 percent is in Pimco Total Return Institutional and 50 percent in Mutual Global Discovery. We have very little debt, and we owe nothing on cars or credit cards. But I'm not sure if I'm making the right investment choices, and I'm worried about inflation too. I would appreciate any thoughts or suggestions, and tell me if I'm doing the right thing. Should I make any changes? Am I on the right track? And finally, I've never bought common stocks but want your opinion on buying Burger King, which I'm told will be a new issue this October. Would you recommend I buy the stock?

TS in Oklahoma City, Okla.

Dear TS:

Not only are you on the right track but you're also traveling in the right direction and at the right speed, and I wouldn't recommend changing engines or engineers. Pimco Total Return (PTTRX-$11.26) is among the few jim dandy, no-load mutual funds on our planet that has a low expense ratio, a portfolio with 35 percent cash, 45 percent bonds , no common stock, 25 percent invested in stuff that defies description and an above average long term performance. But suffice it to say, PTTRX's $255 billion portfolio has performed wondrously with an average 5 year return of 8.34 percent and an average 10 year return of 7.03 percent, and it hasn't had a down year since 1999 when performance was a minus 0.28 percent. However, few investors can own PTTRX unless they, like you, are employed by a huge, multi-billion dollar Fortune 500 company. The minimum entry level begins at $1,000,000. Mutual Global Discovery (TEDIX-$27.98) is hugely more aggressive than PTTRX. About 85 percent of its smallish $19 billion portfolio is in stocks with a global perspective like Vodafone, British American Tobacco, Pernod, Kraft, Merck, Imperial Tobacco and Royal Dutch Shell. The remaining 15 percent is in bonds and cash. Even though TEDIX has a high 5.75 percent sales charge and a costly 1.30 percent annual expense ratio, its performance is not unimpressive, as management produced a 10 year average return of 7.47 percent. But TEDIX really got bonked in 2008 when its portfolio crashed 26 percent, truncating its 5 year average return to less than 1 percent. Still, TEDIX has been good to you. "If" ("if" is the operative word) both funds perform in the future as they have in the past, you'll be in clover, high cotton and fine fettle when you're ready to hang up your tools. But continue to read future columns that will discuss , as they have in the past, the wisdom of owning stocks with growing dividends and reinvesting those dividends every quarter. This is where you might invest your Roth and some personal funds to experience the wondrous magic of compounding. This will also provide you with good investment balance for your future as well as superb inflation protection. You might consider AT&T and Verizon.

I have no interest in a Burger King IPO. But I enormously enjoy its juicy, humongous Triple Whopper with extra cheese. And I wear a bib when I eat this monstrosity because it drips on me like a second cup of poured coffee. I don't give a hoot in Hoboken if this monstrosity has 12,000 calories, 15 ounces of trans fats and is garnished with vein clogging cholesterol. It's one of the four vices in which I allow myself to indulge. But if Bill Ackman's Justice Holdings succeeds in taking BK public again, I wouldn't in a hundred or a thousand or a million years buy BK stock. Burger King's problem is not its product or its locations; rather, its over-arching failure is a poor selection of franchisees. This is where McDonald's (MCD-$98) shines because MCD carefully selects franchisees based on intelligence, common sense, business acumen, financial strength and a willingness to be a team player. The success of a MCD and a BK unit depends so importantly on their franchisees. Just compare a MCD's and a BK unit on the same block and you'll know why I won't own BK stock.


Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com.

© 2012 Creators Syndicate Inc.

Published: Mon, May 21, 2012