TAKING STOCK: Mutual fund recommendations

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Dear Mr. Berko:

My husband is an engineer with a secure job. I run the household, take care of our 12-year-old son and two dogs, make all the investment decisions for our retirement, and pay the bills. We're both 44. Our objective is long-term growth, and we have $53,000 to invest. I'm darn tired of reading Barron's, Fortune, The Wall Street Journal and other financial publications. I'm sick and tired of following and reading research reports and charting and keeping current on our portfolio of 28 stocks, which is worth $339,000. It's frustrating when I try to make a decision about holding or selling some of them. And I'm darn tired of searching the many investment options to replace a stock I sold or to invest fresh money. There are thousands of exchange-traded funds, closed-end funds, mutual funds and individual stocks. It's mind-boggling. Do you have any recommendations?

-JD, Oklahoma City


Dear JD:

Things were so different before everything changed.

In January 1958-when I was working for Merrill Lynch, Pierce, Fenner & Beane-the Dow Jones 30 was trading at 440. In January 1959, the Dow was trading at 588, and 12 months later, it was trading right at 678. The average daily volume was about 3 million shares, and a 2-point one-day gain in the Dow was a big deal. Who would have imagined then that a 440-point movement in the Dow in one day would not be uncommon and a daily volume of between 2 billion and 5 billion shares would be common? Those were the days when Merrill Lynch was truly the "thundering herd." ML championed the small investor with its monthly investment plan, in which Jack and Jill could invest several dollars a week in any of the stocks on the New York Stock Exchange.

Investing was simple then. We didn't have no-load funds. We bought the motors, the steels and the Seven Sisters. AT&T was the phone company, though most small towns had their own telephone exchanges. There were a dozen drug companies. Utility stocks were revered, while United Fruit, A&P, McCrory's, Studebaker, the S.S. Kresge Co., metal and mining stocks, and the rails were also portfolio options. Today our universe of options has taken a quantum leap. Imagine the Rubik's Cube. Now think of the Rubik's Cube in four dimensions. OMG. You'd need every angel in heaven plus a quantum computer to make investment choices among the tens of thousands of different securities traded daily.

You could hire a money manager, consult a bank's trust department, use a robo-adviser or purchase one of the numerous internet-advertised investment programs so frequently marketed by grifters and pseudo apostles. But I think there's a better way. Consider investing $10,600 in each of the following five mutual funds. Each is no-load, and each has earned better than a 10 percent average annual total return for its one-, three-, five-, 10- and 20-year performance periods.

The Vanguard Capital Opportunity Fund (VHCOX) is a no-load fund that invests primarily in U.S. stocks considered to have prospects for rapid growth in revenues and earnings. Biogen, Southwest Airlines, Nvidia, NetApp, Eli Lilly, Adobe Systems and Amgen are among its largest positions. VHCOX's return last year was 21.2 percent. For the past three years, VHCOX has had an average annual total return of 12.64 percent. During the past five years, VHCOX has had an AATR of 16.81 percent. VHCOX's 10-year AATR is 11.91 percent, and its 20-year performance is 13.58 percent. Those numbers surpass any other benchmark by orders of magnitude. A $10,600 investment in VHCOX made 20 years ago would be worth $130,000 today. If VHCOX's coming 20-year performance were to be only 8 percent, $10,600 would grow to $52,000 with no muss, fuss or bother. The following four no-loads also have one-, three-, five-, 10- and 20-year AATRs in excess of 10 percent: the Vanguard Primecap Fund (VPMCX), the Fidelity OTC Portfolio (FOCPX), the Fidelity New Millennium Fund (FMILX) and the Amana Growth Fund (AMAGX).

Burn all those reports, statements, records and charts. In 20 years, with an 8 percent AATR reinvested quarterly, that $53,000 could be worth $271,000 when you're 64. If you follow my advice, I think you'll be enormously better off in the long run.

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Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

©2018 Creators.com

Published: Tue, Jun 26, 2018

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