TAKING STOCK: Talking funds


Dear Mr. Berko:

My wife and I are engineers, and we're in our late 40s. In June 2015, you recommended a group of single-country exchange-traded funds, and we bought 800 shares of the iShares MSCI Italy Capped ETF at $15. It's now about $31, and our stockbroker wants us to sell this ETF and put the money in the Putnam Global Health Care Fund, which has a 10-year average annual total return of 11.1 percent. Please tell us what you think of this trade. If you don't like Putnam, what investment would you recommend? We seek capital gains but don't want to own risky stocks. That's why we buy ETFs or mutual funds, because there's safety in diversification.

-PF, Kankakee, Ill.

Dear PF:

Founded in 1937, the eminently respectable Putnam Investments has a sterling reputation. I like everything about Putnam except its outlandish 5.75 percent mutual fund commissions. However, the Putnam Global Health Care Fund (PHSTX-$59.38) doesn't have "a 10-year average annual total return of 11.1 percent." Either your broker's Slinky's kinked or he's smoking those left-handed Luckys! PHSTX's 10-year load-adjusted return is 9.4 percent. Not bad, but it's a 16.6 percent difference.

I recommended seven European ETFs in that column two years ago. Fortunately for you, the fund you selected, the iShares MSCI Italy Capped ETF (EWI-$31.09), is the only issue that still trades above its recommended price. But I think it would be wise to take EWI off the table. The Italian economy is the eighth-largest in the world and the third-largest in the eurozone. However, the Italian economy is tethered by political, social and economic chains. Italy can't reduce its debt burden because of sterile economic growth, high unemployment and a lack of labor reform. Add to that continued failure to meet spending targets, intransigent unions, a low birthrate, a shrinking gross domestic product and dreadfully corrupt local and national politicians and Italy's economy is just a few clowns short of a circus. All this is compounded by an ongoing weakness in the banking sector and a risible failure of Parliament to bring solutions to the table. Italy's gates are down, and her lights are flashing, but the train isn't coming. It seems that Rome and Washington are on the same glide path.

I think your broker gave you good and timely selling advice. Take it. However, his Putnam Global Health Care Fund advice would be extraordinarily expensive, because it would cost you a 5.75 percent commission plus annual expenses of 1.1 percent to own it. I know that brokers have pot and mortgage payments, cars, boats, motor homes and credit cards to pay off and other bills, too. But 5.75 percent of a $24,872 purchase is $1,430. That would be a lot of bucks to pay when there are far better no-load funds you could own in the same sector.

Consider the following funds. The T. Rowe Price Health Sciences Fund (PRHSX-$74.69) has a three-, five- and 10-year performance record of 13.3 percent, 20.8 percent and 16 percent, respectively. Fidelity Adviser Health Care Fund's (FHCIX-$47.17) performance is 10.8 percent, 20.8 percent and 13.3 percent for the same time frame. The Janus Henderson Global Life Sciences Fund's (JAGLX-$56.49) record is 10.7 percent, 20.9 percent and 13.3 percent, while the BlackRock Health Sciences Opportunities Fund's (SHSAX-$54.86) record is 13 percent, 19.8 percent and 13.7 percent. All four of these no-loads handily trump the Putnam Global Health Care Fund's three-, five- and 10-year returns of 7.9 percent, 15.3 percent and 9.4 percent.

Your broker, who probably fell out of the family tree, could buy those funds for you. If you want to keep this guy as your agent, here's my suggestion. You'll probably pay him $275 to sell 800 shares of EWI; Charles Schwab or Fidelity would charge you only $4.95. Give him the business, but tell him to invest $6,218 in each of the above four no-loads, and tell him you'll pay a 1 percent commission ($248) to buy them. If your broker's office manager won't allow it-big brokerages and small investors don't mix well-then take your business to Schwab, Fidelity or another discount broker who will be happy as a hog on ice to take your orders.


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.

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Published: Tue, Sep 19, 2017