Mutual Fund Investing

With inflation rearing its ugly head and commodity prices on a tear, gold-oriented mutual funds are doing well these days. If you’re looking to add some shine to your fund portfolio, American Century Global Gold is the best pure-play on gold..

A money market mutual fund is managed to maintain a net asset value of $1 per share. That’s possible because the investments are in the same currency as the fund: the U.S. dollar. When different currencies are involved…

Investors who have a social bent and who want to scoop up bargains now should take a look at Ariel Focus.

I had in mind a Halloween-themed column this week, in which I would find the mutual fund with the scariest performance. Well, there’s not much challenge in that these days. In my search, though, I came across an interesting paper, "Return Persistence and Fund Flows in the Worst Performing Mutual Funds," by Jonathan Berk of University of California at Berkeley and Ian Tonks of the University of Exeter.

In this current market morass, a lot of investors are looking to move to cash. Unfortunately, cash isn’t as safe as it once was.

One group of investors is deliriously happy these days: shareholders in the Grizzly Short Fund (GRZZX). In a market crash of spectacular proportions, the fund has held up just as it was designed to.

Is any money smart these days? I’m sure someone has made a heck of a profit off of the recent market decline, but who? Who are these smart - or lucky - investors? Is there any way to profit from their choices? 

With so much bad news about real estate, it’s hard to believe that a real estate fund could have good returns. Yet the First American Real Estate Securities Fund has held up quite well because its holdings are almost entirely commercial properties. It’s the residential sector that has been saddled with overbuilding, subprime debt and foreclosures.

The new AARP funds are allocated among different index funds. The Conservative Fund, for example, is invested 25% in U.S. government bonds, tied to the Lehman Brothers Aggregate Bond Index (at least, that was still the index’s name at press time); 20% in U.S. stocks, based on the Morgan Stanley Capital International U.S. Investable Market 2500 Index of 2500 large stocks; and 5% in international stocks, based on the Morgan Stanley Capital International Europe, Australasia and Far East Index (also known as EAFE).

Fannie Mae and Freddie Mac were known for having tight underwriting standards. Mortgages that conformed to their requirements were made to borrowers with good credit who could put down large down payments. (This didn’t mean that they would never default.) These mortgage-backed securities were popular with investors because they offered higher potential returns than Treasury securities, but they had the implied backing of the Federal government.

The fund holds 106 different stocks; the prospectus calls for 80% of assets to be in Latin America or in companies based elsewhere that do significant business in Latin America. In practice, almost all assets are based south of the Rio Grande.

That’s the investment thesis of our Labor Day special, the Parnassus Workforce Fund. It invests in the stocks of companies that are believed to provide better-than-average working conditions for employees. The fund’s portfolio manager, Jerome Dodson, and his team look at such factors as equitable pay and benefits, family-friendly policies and support for volunteerism.

Vanguard Explorer has long been a popular small-cap stock fund. So popular, in fact, that it is periodically closed to new investors. Given the current dismal drop in the stock market and accompanying cash outflows, the fund’s management has decided that it can take on more investors. Is this a buying opportunity?

The academics say that investors shouldn’t even bother trying; they should simply figure out what their risk tolerance is, then invest in a combination of index equity funds and fixed-income securities based on that. Index mutual funds make it easy for investors to buy the market on the cheap and take away some of the angst about making financial decisions that novice investors have.