STOCK TO STUDY: T. Rowe Price Group, Inc ... - BetterInvesting

More documents

Recommendations

Info

FEATURE | Cover Story Titles such as “new explorer” might be code for “really risky speculative invest ments.” If that’s what you’re looking for, fine, but be sure you understand what’s behind the name. 8. Don’t Just Set It and Forget It In any given year, some of your funds will do better and some worse. To maintain your portfolio’s balance (and risk level), once a year you should rebalance back to your original targets by selling shares in any that exceed your target and purchasing shares in those that have fallen below your target percentages. Although it may seem counter - intuitive to buy more of the “losers,” in the long run you’ll be buying low and selling high. Over time, studies have shown that annual rebalancing offers about a half-percent return premium over not rebalancing. In markets in which one asset is booming, you can end up with a much more risky portfolio if you don’t rebalance. 9. Understand What Share Classes Are Offered Share classes can designate several things. For load funds, share classes such as A, B or C can designate how commissions are charged: upfront, upon sale or disappearing after you’ve held shares for a certain per iod. If you do buy load funds, be sure you understand how much, how frequently and when the load will be assessed. For no-load funds, share classes can be based on required minimum investments. For example, Vanguard’s Investor class shares generally require a $3,000 minimum investment, while the Admiral class may require a $10,000 minimum or more but charges only half the management fee. Other share classes may be available only to investment managers or be specific to em - ployer-sponsored plans. Know what those terms and letters mean to your costs and returns. Funds are mentioned only for educational purposes. No investment recommendations are intended. 10. Invest in Knowledge BetterInvesting always offers regular features on mutual fund investing, as well as the recently revised Mutual Fund Handbook and online mutual fund tools. Morningstar.com and each fund company’s own website can offer plenty of facts, figures and comparisons to allow you to drill down to the details you need. Investing in mutual funds may not be as easy as it first seems, but with some thoughtful research, you can build a solid core of well-diversified investments that can manage your risk while producing good return. Danielle L. Schultz, CFP, CDFA, is a feeonly financial planner and investment adviser in Evanston, Ill. Contact her at www.HavenFinancialSolutions.com. Websites of Interest The BetterInvesting Mutual Fund Handbook, revised by Danielle L. Schultz www.betterinvesting.org/Public/Store/ Store/Books/default.htm 42 | BetterInvesting | March 2013
Although they can vary in their mission and holdings, balanced funds typically offer investors a way to make modest returns while minimizing their potential downside. They usually find the middle of the market — they’ll rarely beat the average equity fund, but they’ll beat the average bond fund. Balanced funds are fairly conservative and aim to attain growth at a reasonable pace, but a growing number of them are straying from the herd and taking more risks in smallcap stocks and short-term bonds. They offer investors a way to be a little more aggressive and value-oriented while still maintaining a traditional mix of equities and bonds. The Balancing Act Michael Kitces, director of research for the Pinnacle Advisory Group of Columbia, Md., says the definition of a “balanced fund” is growing increasingly flexible, but it generally implies a fund that has a mix of stocks and bonds. What exactly that mix is can vary widely, but it traditionally runs around 60 percent to 70 percent in stocks and 30 percent to 40 percent in bonds. Kitces says the principle of most balanced funds is to offer investors exposure to multiple asset classes. Investors frequently use balanced funds in their 401(k) as a standalone portfolio because it’s often the simplest and easiest way for hands-off investors to allocate their funds. Traditional, plain vanilla balanced funds have typically held large-cap stocks and long-term bonds. Consider Dodge & Cox Balanced (ticker: DODBX), which currently has an allocation of 70 percent in stocks and 23 percent in bonds. Its top 10 holdings include Comcast, Merck, Wells Fargo, Time Warner and GlaxoSmithKline. (Equities are mentioned in this article only for educational purposes; no investment recommendations are intended.) Kitces says in recent years more funds have been trying to maintain that stock/bond balanced mix, but they’re diversifying and balancing within the bond and equities markets. “There has been a trend in recent years for funds to try to do a better job of being more diversified,” he says. “And if you’re going to be well-diversified, you need to hold more than large-cap stocks and bonds.” Like any other balanced fund, the Milwaukee-based Villere Balanced Fund (VILLX) seeks to achieve longterm capital growth consistent with preservation of capital and balanced by current income. But Villere partner George Young says the fund differs in its investment Mutual Fund Matters | MUTUAL FUNDS Once-Conservative Products Are No Longer Shunning Risk Some Balanced Funds Try to Race Past the Herd by Craig Guillot philosophy in that it seeks multicap stocks with a smallcap focus on com panies that are contrarian or out of favor. Young says the fund takes a “diamond in the rough” approach and looks for smaller, undervalued companies with a potential for long-term growth. “We are a balanced fund with a (traditional mix of stocks and bonds), but we have more of a small-cap and mid-cap bias, and we have 10 percent in junk bonds,” Young says. Another fund that takes a nontraditional balanced fund philosophy is the Greenspring Fund (GRSPX), based in Lutherville, Md. The fund holds an asset allocation of 46 percent stocks, 34 percent bonds and 10 percent cash. Of those bonds, 16 percent are con - vertible bonds (a hybrid security that eventually can be converted to stock) and 28 percent are corporate bonds. Bill White, Greenspring’s vice president of client development, says behind that balanced mix lies an investment philosophy that fo cuses on value and long-term capital appreciation in which income is important but a secondary objective. “We aim to avoid downturns and try to find small- to mid-cap, less-followed ideas,” White says. “We look for things that everyone isn’t already onto.” Not a Pack Mentality Balanced funds that stray from the herd often find their own ways and philosophies about how to allocate their stocks and bonds. Greenspring looks for undiscovered, unappreciated companies that are on their way up.One “ There has been a trend in recent years for funds to try to do a better job of being more diversified. ” such hidden gem White points to is Rush Enterprises, a Texas-based trucking and transportation company founded in 1965 that now owns and operates the largest network of commercial vehicle dealerships in the United States. White says that Greenspring purchased a stake in the com pany at a deep value six years ago when it didn’t have much of a following and was mainly a regional player. The share price has grown almost March 2013 | BetterInvesting | 43
Page 1 and 2: STOCK TO STUDY: T. Rowe Price Group
Page 4 and 5: CONTENTS | BetterInvesting | March
Page 6 and 7: Editorial For Long-Term Investors,
Page 8 and 9: From the CEO Kamie Zaracki Intervie
Page 10 and 11: PERSONAL FINANCE | Web Watch | Due
Page 12 and 13: PERSONAL FINANCE | Due Diligence |
Page 14 and 15: PERSONAL FINANCE | Financial Planne
Page 16 and 17: INVESTMENT CLUBS | Repair Shop ‘E
Page 18 and 19: INVESTMENT CLUBS | Repair Shop cent
Page 20 and 21: INVESTMENT CLUBS | The Clubhouse De
Page 22 and 23: INVESTMENT CLUBS | The Clubhouse Th
Page 24 and 25: STOCK TO STUDY | Featured Company I
Page 26 and 27: STOCK TO STUDY | Featured Company
Page 28 and 29: STOCK TO STUDY | The Stock Selectio
Page 30 and 31: STOCK TO STUDY | Featured Company 2
Page 32 and 33: UNDERVALUED | Featured Company Amer
Page 34 and 35: STOCKS | Growth Stocks Colgate Is S
Page 36 and 37: Empowering Investors Since 1951 tim
Page 38 and 39: DISCUSSION & ANALYSIS | Between the
Page 40 and 41: DISCUSSION & ANALYSIS | Random Walk
Page 42 and 43: FEATURE | Cover Story by Danielle L
Page 46 and 47: MUTUAL FUNDS | Mutual Fund Matters
Page 48 and 49: MEMBERSHIP | First Cut Fundamentals
Page 50 and 51: MEMBERSHIP | Chapter Contacts In th
Page 52 and 53: MEMBERSHIP | Chapter Contacts NEVAD
Page 54: MEMBERSHIP | Performance Review Big

STOCK TO STUDY: T. Rowe Price Group, Inc ... - BetterInvesting

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?