Berko: Five no-load funds with excellent records
Friday, November 15, 2013 7:00 AM
Dear Mr. Berko:
I am 44 and have been working at the same company for 15 years. I’ve invested $84,000 in my 401(k) plan. My employer contributed just under $10,000. And after 15 years of investing in the mutual funds selected by my employer, this account is worth $126,000. That’s lousy performance, and most of the folks working here haven’t a clue that their retirement plan’s performance is so bad. My wife works part time, so we manage to save about $350 a month in addition to my Roth individual retirement account and my 401(k) contributions. I’ve come to the realization that at this rate, we will never have enough money to retire and live like human beings. When I read your article about investing for grandchildren, I persuaded human resources to let me roll over $100,000 of my 401(k) to an IRA so I could invest $10,000 in each of the five T. Rowe Price funds you wrote about. Then I was going to hold the remaining $50,000 in an IRA money market account and wait for stocks to come down. But I decided I’m not smart enough to play the market, so I will invest that money, too. Could you recommend five other no-load funds with similar records?
S.D., Oklahoma City
Most Americans are financially challenged. However, after five beers, they have the skills to dance a gavotte, scarf down a dozen hot wings and balance a Bud Light on their heads without spilling a drop. But they don’t have the skills to balance a checkbook or a budget, and they think a blue chip is worth $5 at Tuesday night’s poker game. Many Americans lack the discipline to prepare for retirement (knowing government programs will mother them), so they’ll be standing in the Alpo line when they hang up their tools. And if you keep your employer’s mutual funds, you’ll be joining a lot of friends there.
Your company’s pension plan, like most corporate plans, offers a variety of piddling to middling mutual fund options, not one of which earned a superior one-year performance record since your participation in this plan began.
During the past 15 years, your total cumulative return is about a dinky 39 percent, and most civil service plans are just as disappointing. But that’s what’s expected of government work – unless, of course, you’re a member of Congress. The other problem, in addition to the confusing garbage of mutual funds, is that employees are not given clear, understandable information to help them make knowledgeable choices. There’s no reason your employer can’t allow you to invest your 401(k) in those T. Rowe Price funds. He owes it to you, and frankly, those T. Rowe Price funds have done almost five times as well as the trash and chaff his employees own. Because the difference in long-term performance is so obvious (more than 11 percent annually for 10 years versus 2.5 percent), some might believe it’s a conspiracy to keep workers poor and dependent on corporate largesse. Employers should care enough to employ a trusted professional (not a friend or business associate) to select good funds for their employees’ plans. The following five no-load funds have one-, three-, five- and 10-year returns in excess of 10 percent. Shamefully, there isn’t a fund in your employer’s portfolio that can hold a candle to these.
The Bruce Fund (BRUFX-$457.02) has a $445 million portfolio with a 13.3, 11.5, 13.2 and 13.1 percent performance record for one, three, five and 10 years, respectively.
Fidelity Growth Company Fund (FDGRX-$121.41), with $52 billion in assets, has a 24.3, 19.2, 14.6 and 10.8 percent return for one, three, five and 10 years.
The $44 billion Fidelity Low-Priced Stock Fund (FLPSX-$48.72) has a 28.5, 17.8, 14.4 and 11.2 percent performance for those years.
The $6.5 billion Vanguard Selected Value Fund (VASVX-$28.33) has a 32.5, 18.5, 14.4 and 11.1 percent return for those years.
And Wells Fargo Advantage Discovery Fund Investor Class (STDIX-$34.04), with $2.5 billion in assets, has a 31.7, 21.1, 15.6 and 11.8 percent record for those years. Makes investment sense to me.
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