QikReview: Top Specialty-Natural Resources Mutual Funds

Below is a brief review of three Specialty-Natural Resources mutual funds.

T. Rowe Price New Era (PRNEX)

Category: Specialty-Natural Resources
Rating: 4
Capital Gains Exposure: 45%
Assets: $6.2 bil
Expense Ratio: 0.66%
Turnover Ratio: 16%
Yield: 0.93%
Redemption Period: 0 days
Redemption Fee: 0.0%
3-Year Total Cost: $211
Minimum Investment: $3,000
Comments: Although absolute returns are solid (31% 5-year returns and 15% 10-year returns), relatively speaking this fund is in the middle of the pack as it ranks a measly #50 among peers in 10-year returns and #55 in 5-year returns. Volatility seems to be relatively low. This Large-cap Growth fund invests into Giant (34), Large (39), and Medium (24) companies. Has 6% in Cash and 30% fo total assets in Foreign Stocks. Invests in Industrials (24) and Energy (66) sectors. Specifically, it invests into Oil & Gas (28), Oil & Gas Services (31), Utilities (6), Misc. Industrials (10). It has a large number of holdings, 106, and a low-level of concentration into particular stocks (only 28% of assets in the Top 10 holdings), but turnover ratio is tiny at 16%. I recognize most of the companies on their top 25 holdings list. I think this is a solid fund with a diversified focus that I'll keep an eye on, but ignore for the time being because of the run-up of prices in the energy and natural resources companies.

Excelsior Energy & Natural Resources (UMESX)

Category: Specialty-Natural Resources
Rating: 4
Capital Gains Exposure: 10%
Assets: $0.7 bil
Expense Ratio: 1.12%
Turnover Ratio: 279%
Yield: 0.10%
Redemption Period: 30 days
Redemption Fee: 2.0%
3-Year Total Cost: $359
Minimum Investment: $2,500
Comments: Middle-of-the-pack performance with a significant volatility. Even though absolute returns are respectable, relative to its peers it's fairly average. This Large-cap Growth fund invests into Giant (20), Large (43), Medium (26), and Small (9) companies. It invests into Industrials (23) and Energy (73). More specifically: Oil & Gas (51), Oil & Gas Services (25), and Hard Commodities (6). It has 3.3% of assets in Cash. It has a reasonable number of holdings at 55, but a very high turnover ratio of 279%. It's probably a decent choice as far as energy/mining funds go, but I wouldn't touch it at this point.

U.S. Global Investor (PSPFX)

Category: Specialty-Natural Resources
Rating: 4
Capital Gains Exposure: 14%
Assets: $1.5 bil
Expense Ratio: 0.94%
Turnover Ratio: 122%
Yield: 5.17%
Redemption Period: 30 days
Redemption Fee: 0.3%
3-Year Total Cost: $316
Minimum Investment: $5,000
Comments: One of the best funds in its category by returns: it's #1 in 5-year returns, #13 in 10-year returns, and #11 in 3-year returns. It is definitely a cyclical fund as it was pretty much non-performing from 1998 until it roared back in 2003 and has been making amazing returns until now. So, for five years it was useless and for another 5 years it was stunning. I'm not sure how many more years it can yank out great returns, but I would think it's closer to the end of the booming cycle than the beginning. This is a Large-cap Growth fund that invests into the Industrial Materials/Energy sectors: Oil & Gas (29), Oil/Gas Productions (4), Oil & Gas Services (33), Utilities (4), Hard Commodities (19), and Misc Industries (3). It has 5% in Cash. It invests into Giant (26), Large (24), Medium (35) and Small (12) companies. 55% of assets are in the Foreign Stocks. It has 190 holdings, 122% turnover ratio, and only 26% of assets in the Top 10 holdings. I think this fund has too many holdings and is toward the end of its cycle. So, even though it's good fund to keep in mind in the future, at this time I will most certainly pass on it although it may very well post solid returns in 2008.

QikReview: Top Specialty-Precious Metals Mutual Funds

Below is a brief review of three Specialty-Precious Metals mutual funds.

USAA Precious Metals (USAGX)

Category: Specialty-Precious Metals
Rating: 4
Capital Gains Exposure: 50%
Assets: $1.1 bil
Expense Ratio: 1.21%
Turnover Ratio: 29%
Yield: 1.56%
Redemption Period: 0 days
Redemption Fee: 0.0%
3-Year Total Cost: $384
Minimum Investment: $3,000
Comments: This fund's returns are nothing short of outstanding: it ranks #1 in 10-year returns and in the top 10 for 3-year and 5-year returns; although it is only #35 in 1-year returns. Absolute returns though is what really caught my attention: 23% annually over 10 years, 34% over 5 years, 41% over 3 years, and 33% over 1 year! Volatility is certainly present though: it lost 11% in 2004 and I'm sure it wasn't so hot when the gold prices weren't plowing through the roof in other decades. This is a Mid-cap Growth fund that invests into Giant (5), Large (53), Medium (30), and Small (12) companies. It holds 5% in Cash and the rest in Stocks, with 80% of assets in Foreign Stocks. Its exposure is in Canda (51), the U.S. (15), South Africa (10), Australia (9), Peru (5), and Asia ex-Japan (11). With 46 holdings this fund is relatively concentrated. Turnover is also relatively low at 29%. It has 57% of assets in the Top 10 holdings. This is a good specialty fund, but it's definitely speculative. One of the key components for a success of such funds is a weak dollar. As the Fed will be forced to raise the rates back at the end of 2008 / beginning of 2009, dollar may strengthen. Also, this fund in particular, and gold in general, has been having too much fun lately, and I expect it to end or at least tamper off in 2008/2009.

U.S. Global Investor (UNWPX)

Category: Specialty-Precious Metals
Rating: 3
Capital Gains Exposure: 24%
Assets: $1.0 bil
Expense Ratio: 0.99%
Turnover Ratio: 54%
Yield: 10.51%
Redemption Period: 30 days
Redemption Fee: 0.5%
3-Year Total Cost: $332
Minimum Investment: $5,000
Comments: This fund is #1 among peers in the 5-year returns at 40%, but it is a horrible #68 in 10-year returns. It is very volatile, altough does perform very well when the market does well.
This Small-cap Growth fund invests into Large (12), Medium (45), Small (29), and Micro (15) companies. It invests into Industrial Materials (97). It has 6% in Cash. It has exposure in Canada (63), the U.S. (8), the U.K. (7), South Africa (3), and Australia (2). It has a very large number of holdings, 234, and reasonable turnover ratio of 54%. Fund's 36% of assets are in the top 10 holdings, which is not concentrated. This funds focus on small-cap stocks in the precious metals sector seems very risky in general and at this time in particular.

DWS Gold & Precious (SCGDX)

Category: Specialty-Precious Metals
Rating: 3
Capital Gains Exposure: 24%
Assets: $0.8 bil
Expense Ratio: 1.26%
Turnover Ratio: 52%
Yield: 3.51%
Redemption Period: 15 days
Redemption Fee: 2.0%
3-Year Total Cost: $397
Minimum Investment: $2,500
Comments: Middle-of-the-pack performance with high volatility. Although, arguably, rewards provided by this fund justify the volatility, I don't think so. This Mid-Growth fund invests into Giant (14), Large (38), Medium (31), and Small (17) companies. It has exposure in Canada (31), Australia (14), South Africa 913), the U.K. (6), and the U.S. (4). It has zero in Cash. It has a modest number of holdings - 43, and reasonable turnover ratio of 52%. This fund is a tier-2, in my opinion. Although, worth considering for various portfolio allocation models.

QikReview: Top Other Foreign Mutual Funds

Below is a brief review of the three other foreign-oriented mutual funds (World Stock, Latin America, and Diversified Emerging markets).

Polaris Global Value (PGVFX)

Category: World Stock
Rating: 3
Capital Gains Exposure: 5%
Assets: $0.5 bil
Expense Ratio: 1.23%
Turnover Ratio: 5%
Yield: 1.46%
Redemption Period: 180 days
Redemption Fee: 1.0%
3-Year Total Cost: $390
Minimum Investment: $2,500
Comments: Middle-of-the-pack returns, which are great in absolute terms, but not so great relative to its peers. Capital gains exposure is negligible at 5%. It invests into Mid-cap Value companies. It holds no Cash. It invests into Financials (24), Consumer Goods (9), Industrial Materials (34), and Business Services (10). It's in the U.S. (33), Japan (14), Finland (7), Ireland (6), South Africa (6), and the rest of Asia (6). This fund has performed terribly in 2007 in absolute terms and relative to its peers (it lost about 4% while most peers gained in double digits). I don't think I like this fund's style too much.

T. Rowe Price Latin (PRLAX)

Category: Latin America
Rating: 4
Capital Gains Exposure: 51%
Assets: $3.3 bil
Expense Ratio: 1.24%
Turnover Ratio: 35%
Yield: 0.77%
Redemption Period: 90 days
Redemption Fee: 2.0%
3-Year Total Cost: $393
Minimum Investment: $2,500
Comments: It's #1 in 10-yr, 3-yr returns, and #8 in 5-year returns. Absolute returns are just unbelievable. Invests in Large-cap Growth; Telecom (10), Consumer Services (12), Financials (22), Industrial Materials (23), Energy (21). Geographically, it's in Brazil (67), Mexico (24), and Chile (3.5). It has 46 holdings with 65% of assets int Top 10 holdings. It's largest positions are in the two companies that I've actually heard of: Petroleo Brasileiro, which recently discovered a huge oil field, and America Movil, which is the top wireless operator in Mexico and is controlled by the world's second wealthiest man, Carlos Slim. It has only 1.4% in Cash. This fund has provided investors with exceptional returns during the past 5 years, the music has to stop at some point and I don't want to be a part of the Latin America sell-off, which tends to be prolonged from what I hear. As much as I'd like to have exposure to countries such as Brazil and Mexico, right now simply may not be the best time to do so with valuations soaring and global boom has become questionable.

T. Rowe Price Emerging (PRMSX)

Category: Diversifed Emerging Markets
Rating: 3
Capital Gains Exposure: 33%
Assets: $4.3 bil
Expense Ratio: 1.25%
Turnover Ratio: 44%
Yield: 0.74%
Redemption Period: 90 days
Redemption Fee: 2.0%
3-Year Total Cost: $400
Minimum Investment: $2,500
Comments: This fund has produced respectable returns and is in the top 20 among peers for 1-, 3-, 5-, and 10-year total returns. This fund moves with its category and doesn't do very well in the bear markets. It may lose somewhat less than some of its peers, but it will still lose and last time it stayed negative for 3 years after the market drop. This Large-cap Growth funds invests into Giant (30), Large (45), and Medium (24) companies. It invests into Telecom (6), Consumer Services (9), Business Services (8), Financials (36), Consumer Goods (7), Industrials (20), and Energy (8). It has exposure in Brazil (14), China (12), South Korea (11), India (10) Taiwan (8). This fund has a large number of holdings, 134, and reasonable annual turnover ratio of 44%. This fund makes for an interesting choice in the global bull market, but at this time I deem it too risky.

QikReview: Top Pacific/Asia ex-Japan Mutual Funds

Below is a brief review of three Pacific/Asia ex-Japan mutual funds.

Matthews Korea (MAKOX)

Category: Pacific/Asia ex-Japan
Rating: 3
Capital Gains Exposure: 45%
Assets: $0.2 bil
Expense Ratio: 1.28%
Turnover Ratio: 26%
Yield: 0.27%
Redemption Period: 90 days
Redemption Fee: 2.0%
3-Year Total Cost: $412
Minimum Investment: $2,500
Comments: This fund is #1 among peers in 10-year returns, but it's at the bottom of the pack for all other rankings. It's pretty volatile and I can see it crashing before starting to make a new streak of gains. This is a Large-cap Value fund that invests into Giant (22), Large (41), Medium (29), and Small (7) companies. It invests into Telecom (7), Healthcare (15), Consumer Services (8), Business Services (15), Financials (25), Consumer Goods (16), and Industrials (6). It has exposure to South Korea only. This fund is way to volatile and one-country dependant. Although the fund's long-term strategy seems to work, it's very volatile in the short-term. This fund is something to keep an eye on for now.

Fidelity Southeast Asia

Category: Pacific/Asia ex-Japan
Rating: 4
Capital Gains Exposure: 27%
Assets: $4.2 bil
Expense Ratio: 1.04%
Turnover Ratio: 72%
Yield: 0.77%
Redemption Period: 90 days
Redemption Fee: 1.5%
3-Year Total Cost: $347
Minimum Investment: $2,500
Comments: Although absolute returns are incredible (35% 5-year returns and 17% 10-year returns), relatively speaking this fund is in the middle of the pack as it ranks a measly #29 among peers in 10-year returns and a decent #8 in 5-year returns. It is very volatile and doesn't strike me as a great bear-market performer. This Large-cap Blend fund invests into Giant (35), Large (47), and Medium (18) companies. It has exposure in China (27), South Korea (25), Hong Kong (11), Taiwan (8), and Singapore (7). It has only 1.4% in Cash. It invests into Telecom (8), Business Services (20), Financials (21), Consumer Goods (8), and Industrial Materials (21).
It has a large number of holdings, 124, a low-level of concentration into particular stocks (only 22% of assets in the Top 10 holdings), and a low level of commitment to its investments (turnover rate of 72%). This seems to be a decent fund, but it's not doing anything for me. Absolute performance is off the charts, but there are plenty of better-performing peers. I may revisit the fund once the Asian markets cool off a bit, but it's not just the overpriced markets, I'm not sure that I like this fund all that much.

T. Rowe Price New Asia

Category: Pacific/Asia ex-Japan
Rating: 4
Capital Gains Exposure: 29%
Assets: $4.8 bil
Expense Ratio: 1.05%
Turnover Ratio: 53%
Yield: 0.96%
Redemption Period: 90 days
Redemption Fee: 2.0%
3-Year Total Cost: $334
Minimum Investment: $2,500
Comments: A very volatile fund with very respectable returns. It is #3 in 1-year returns, #6 in 5-year returns, but only #30 in 3-year and #34 in 10-year returns. This Large-cap Growth fund invests into Giant (9), Large (54), and Medium (35) companies. It invests into Business Services (11), Financials (31), Consumer Goods (20), Industrials (19), and Utilities (8). It has exposure to India (37), China (28), South Korea (13), Taiwan (8), and Singapore (3). It has 86 holdings and a 53% turnover ratio. Only 24% of assets are in the Top 10 holdings. It doesn't seem to be investing in the hottest companies right now since I didn't recognize any of the holdings in the top 25. Once I'll be convinced that Asia is worth investing in, this fund will on my on short list of candidates.

QikReview: Top Europe Stock Mutual Funds

Below is a brief review of two Europe Stock mutual funds.

ING Russia A LW (LETRX.LW)

Category: Europe Stock
Rating: 3
Capital Gains Exposure: -%
Assets: $0.8 bil
Expense Ratio: 1.98%
Turnover Ratio: 12%
Yield: 0.00%
Redemption Period: 365 days
Redemption Fee: 2.0%
3-Year Total Cost: $1,198
Minimum Investment: $1,000
Comments: It is #4 for 1-year returns. #1 for 5- and 3-year returns! After its humongous crash in 1998, fund returns have been outstanding ranging from 80% in 2001 to 5% in 2004. So far it's down by 13%, but Russia should keep on soaring. Invests into Large Growth companies; Telecom (14), Financial (16), Industrial Materials (16), and Energy (42); only 1% in Cash. It has only 30 holdings, with the largest stake of 14% in the Sberbank, Russia's central bank. It is definitely very expensive. It doesn't seem possible to get this fund without the load or maybe I just don't know how to get it waived. A 5.75% front load + 365 day redemption makes this fund a no-go for me.

Fidelity Nordic (FNORX)

Category: Europe Stock
Rating: 4
Capital Gains Exposure: 16%
Assets: $0.8 bil
Expense Ratio: 1.10%
Turnover Ratio: 62%
Yield: 4.03%
Redemption Period: 90 days
Redemption Fee: 1.5%
3-Year Total Cost: $337
Minimum Investment: $2,500
Comments: This is a decent fund for it's category with a relative performance that is not too bad at #16 for 5-years and #9 for 3-years, although 1-year returns rank it only #27. I don't like anything that falls for a long, long time and this fund was down in 2002, 2001, and 2000. This downward spiral isn't very inspiring, especially with the bear market bearing over us. This Large-cap Growth fund invests into Giant (30), Large (41), Medium (17), and Small (11) companies. It invests into Hardware (20), Telecom (14), Healthcare (10), and Indistrials (29). It has exposure to Sweden (35), Finland (21), Norway (18), Denmark (7), and Switzerland (3). It has only 1% of assets in Cash. This fund has an interesting niche with decent returns, but it is far from being a top pick on my list.

QikReview: Top Foreign Mutual Funds

Continuing the QikReview series of mutual funds reviews, below are brief reviews of top "Foreign" mutual funds. In addition to these "Foreign" funds, I will also post reviews of "Europe," "World," and some other region-specific mututal funds.

Dodge & Cox International Stock (DODFX)

Category: Foreign Large Value
Rating: 5
Capital Gains Exposure: 10%
Assets: $50 bil
Expense Ratio: 0.66%
Turnover Ratio: 9%
Yield: 2.88%
Redemption Period: 0 days
Redemption Fee: 0.0%
3-Year Total Cost: $211
Minimum Investment: $2,500
Comments: Top-notch management team has produced outstanding returns over time. I like their interest in emerging markets, long-term value approach, and low costs. It's #1 in 5-year returns. It invests into Giant, Large, and Medium companies. It has only 2% in Cash. It has big presence in Japan (20), UK (14) and Western Europe. I don't think I like its very significant exposure to Japan. I like their top 25 holdings.

Fidelity Canada (FICDX)

Category: Foreign Large Blend
Rating: 5
Capital Gains Exposure: 30%
Assets: $4.3 bil
Expense Ratio: 0.97%
Turnover Ratio: 42%
Yield: 0.67%
Redemption Period: 90 days
Redemption Fee: 1.5%
3-Year Total Cost: $306
Minimum Investment: $2,500
Comments: This fund has done very well over time. Its ranks #1 among peers in 1-year, 5-year, and 10-year returns. It's #2 in 3-year returns. One concern is that it took a while for it to rebound from the last bear market, it was down in both 2001 and 2002. It invests into Giant (50), Large (36), and Medium (13) growth companies. 89% of assets are in Canada and 3% are in the U.S. Its major holdings are in Telecom (7), Business Services (10), Financials (26), Industrial Materials (17), and Energy (26). It has about 5% in Cash. I'm not too sure about its holdings, although some of its top holdings are showing up CGM Focus as well. If anything, I would pick CGM over Fidelity here.

Masters' Select International (MSILX)

Category: Foreign Large Blend
Rating: 5
Capital Gains Exposure: 8%
Assets: $1.9 bil
Expense Ratio: 1.06%
Turnover Ratio: 98%
Yield: 0.98%
Redemption Period: 180 days
Redemption Fee: 2.0%
3-Year Total Cost: $369
Minimum Investment: $5,000
Comments: This fund's returns are solid: #2 for 10-year returns and #5 for 3- and 5-year returns among peers. It invests into Giant (31), Large (41), and Medium (20) companies. It holds 5% in Cash. It invests in Healthcare (13), Consumer Services (12), Financials (21), Consumer Goods (12), and Industrial Materials (18). It has presence in Japan (13), the U.K. (12), France (12), Switzerland (9), China (7), Latin America (7), and North America (5). I'm not sure how much I like the Top 25 holdings. Also, it has 75 total holdings and only 25% of total assets in the Top 10 holdings. I don't think that I like 10 people managing a $1.9 billion fund, too many cooks in one kitchen.

T. Rowe Price International Discovery (PRIDX)

Category: Foreign Small/Mid Growth
Rating: 3
Capital Gains Exposure: 12%
Assets: $2.6 bil
Expense Ratio: 1.24%
Turnover Ratio: 68%
Yield: 0.68%
Redemption Period: 90 days
Redemption Fee: 2.0%
3-Year Total Cost: $393
Minimum Investment: $2,500
Comments: Middle-of-the-pack performance as far as total returns go. I'm not at all impressed by it's returns and volatility. This is a Mid-cap Growth fund that invests into Large (6), Medium (61), and Small (31) companies. It has exposure in Japan (16), the U.K. (15), India (7), Germany (6), and China (6). It's diversified among different categories with larger holdings in Consumer Services (11), Business Services (20), and Indistrial Materials (18). It holds 9% of assets in Cash. It has a whopping 207 holdings with a turnover rate of 68% and only 10% of total assets in the Top 10 holdings. It looks and acts more like an index fund although with a higher expense ratio.
I don't see much merit to this fund, it's not to say that it's inferior, but in my eyes it's rather average.

QikReview: Top Domestic Mutual Funds

Below is a brief review of several top domestic mutual funds. They are all large-cap funds since I viewed small-caps as a risky proposition to invest in this year when I started looking into mutual funds. At this point though, it may be a good idea to revisit top small-cap funds as they're bound to come back strongly when the economy starts climbing back from the current stock market bear levels.

CGM Focus (CGMFX)

Category: Large Blend
Rating: 5
Capital Gains Exposure: 26%
Assets: $5.5 bil
Expense Ratio: 1.02%
Turnover Ratio: 333%
Yield: 0.09%
Redemption Period: 0 days
Redemption Fee: 0.0%
3-Year Total Cost: $381
Minimum Investment: $2,500
Comments: Returns are absolutely and relatively outstanding: this fund is #1 among peers in 1-year, 3-year, 5-year, and 10-year returns! They are 53%, 30%, 36%, and 25%, respectively.
It has been volatile, but it seems to reward well those who can handle moderate volatility, which is how I view the extent of this fund's volatility. It invests into Giant (54) and Large (39) companies. It invests into relatively few sectors: Hardware (4), Telecom (9), Business Services (7), Industrial Materials (43), and Energy (36). It has 63% of assets in foreign stocks. It has only 25 total holdings, two of them are shorts. This may actually be a good time to buy into this fund since there is a strong possibility of a strong rebound. Fund has minimal Cash and shorts 10% of the assets. This fund and its manager, Kenneth Heebner, are nothing short of phenomenal.

Fairholme (FAIRX)

Category: Large Blend/Growth
Rating: 5
Capital Gains Exposure: 12%
Assets: $6.8 bil
Expense Ratio: 1.00%
Turnover Ratio: 20%
Yield: 0.68%
Redemption Period: 60 days
Redemption Fee: 2.0%
3-Year Total Cost: $318
Minimum Investment: $2,500
Comments: It's #3 in 5-year returns, #1 in 3-year returns, and top 10 in all other rankings. It invests into Giant, Large, and Medium companies. It has 21% in Cash, which is excellent since it can pounce on opportunities in this down market and not have to sell its long-term holdings. For a domestic fund, it has a large position of 25% in foreign stocks. It has only 22 stocks in its portfolio. It is heavily invested into Berkshire Hathaway and Canadian Natural Resources, at 17% each. I'm not too sure about their portfolio of stocks although their track record is pretty impressive.

Selected American (SLASX)

Category: Large Blend
Rating: 4
Capital Gains Exposure: 35%
Assets: $12 bil
Expense Ratio: 0.90%
Turnover Ratio: 9%
Yield: 1.07%
Redemption Period: 0 days
Redemption Fee: 0.0%
3-Year Total Cost: $287
Minimum Investment: $1,000
Comments: Although it received Domestic Fund Manager of Year in 2005, all I see is middle-of-the-pack performance across the board. Capital gains exposure is very high as well at 35%. With most sector weights similar to S&P 500, this fund has a higher exposure to Financials and Consumer Goods - yep, the two of the worst categories to be in according to the market sentiment. It has only 1% in Cash. It tends to invest into Large/Giant companies. Although it is a solid fund with a long-term value investing approach that I can appreciate, I'm just not impressed with its returns.

T. Rowe Price Equity (PRFDX)

Category: Large Value
Rating: 4
Capital Gains Exposure: 17%
Assets: $23 bil
Expense Ratio: 0.69%
Turnover Ratio: 17%
Yield: 2.02%
Redemption Period: 0 days
Redemption Fee: 0.0%
3-Year Total Cost: $221
Minimum Investment: $2,500
Comments: Another fund with a mediocre performance relative to peers. Potential capital gains exposure is sizable at 17%. Sector weightings are very similar to the S&P 500. Cash is at 5%. It has some solid stocks among its Top 25 holdings, but it just has too many total holdings - 124.
What is, without a doubt, impressive, is the fact that this fund has had only 2 years of negative returns out of the past 21. That is outstanding, but I'd still prefer a more concentrated portfolio of great companies than 100 best from the S&P 500 list that this fund seems to be holding, in my opinion.

American Century (TWSAX)

Category: Large Blend
Rating: 5
Capital Gains Exposure: 11%
Assets: $1.5 bil
Expense Ratio: 1.18%
Turnover Ratio: 172%
Yield: 1.45%
Redemption Period: 0 days
Redemption Fee: 0.0%
3-Year Total Cost: $373
Minimum Investment: $2,500
Comments: This fund's returns are simply not acceptable, even though Morningstar gives it five stars. Its 10-yr return is 7% and 5-yr return is 10%, that absolutely pales in comparison to the likes of CGM Focus and Fairholme. So, I'm not even going to spend any more time researching it.


Permanent Portfolio (PRPFX)

Category: Conservative Allocation
Rating: 5
Capital Gains Exposure: 16%
Assets: $1.7 bil
Expense Ratio: 1.11%
Turnover Ratio: 7%
Yield: 0.43%
Redemption Period: 0 days
Redemption Fee: 0.0%
3-Year Total Cost: $387
Minimum Investment: $1,000
Comments: Relative returns are certainly impressive: this fund is #1 among peers in 1-year, 3-year, 5-year, and 10-year returns! It's also consistent from year to year as it's in the top 5 all the time. Absolute results though aren't quite as impressive as some top funds other categories: it returned 14% annually over the last 5 years and 10% over the last 10 years. This is a Large-cap Blend fund that invests into Giant (21), Large (33), Medium (32), and Small (13) companies. It holds 19% in Cash, 33% in Stocks, 26% in Bonds, and 23% in Other. Foreign stocks are only 2% of the total assets. It invests bond assets almost purely in AAA bonds (98.7% of total bonds holdings). As far as stocks ago, it's allocation is similar to the S&P 500 except for overweight Industrial Materials (21) and Energy (20). Upon further research, it looks like their Other category consists of investments into Gold and Silver. It has a total of 70 stock holdings and 19 bond holdings with a very low turnover ratio of 7%. It is a very steady fund with limited volatility and returns are actually quite respectable considering how stable it has been. I usually don't like funds with this many holdings, but this tenured manager clearly knows what he is doing. I think this fund will perform relatively (to other investments) well in this 2008 bear market. At the very least I'm very doubtful it would lose investors' money. It certainly has done well so far this year.

My 401(k) Mutual Funds: Picks and Allocation

You may be wondering by now if I'll ever post what I picked for my 401(k). The moment of truth has come, although some of you may have guessed already what I picked. Yep, I picked the A-rated funds and here is how I allocated my contributions:

DFA Emerging Markets Value I DFEVX: 40%

Fidelity Capital & Income FAGIX: 20%

Oppenheimer International Bond Y OIBYX: 40%

It's an aggressive portoflio allocation, but I think (and hope) it's a smart one too. Overseas markets should perform better than the domestic market and bonds are here to, both, limit the downside and diversify growth opportunities.

Now that I'm done with the 401(k) funds, it's time to move on to mutual funds for my personal account. So, that's what I'll be looking at next.

My 401(k) Mutual Funds: Fund Ratings

The time has come for me to share how I rate these funds that I've posted reviews for. All funds are rated from A to D. A, of course, being the top choice and D, well, D isn't really a choice at all.

American Funds Growth RGAFX: B (This fund’s enormous size will surely drag down its performance. The number of holdings is so large you might as well invest in the index fund, which is much cheaper.)

DFA Emerging Markets Value I DFEVX: A (I believe emerging markets will continue posting great returns, which weak dollar will only enhance. This fund is a star among peers – it ranks #1 in 5-year returns which are 45%.)

DFA U.S. Small Cap Value I DFSVX: D (I’m very bearish on small caps in general and this fund’s being overweight in Financials only makes it worse.)

Fidelity Capital & Income FAGIX: A (This is one of the highest performing high-yield bond funds with a high-quality management. It tends to do really well during market rallies so my plan here is to load up on this fund in the first half of 2008 and then ride the upstream wave during the second half of 2008 when I expect market to rebound.)

Fidelity Contrafund FCNTX: B (This is a very well-regarded fun with a great track record, my only concern is that, historically, this fund hasn’t done well in bear markets. It’s also very large, which makes it more difficult to quickly get out from bad positions and get into good ones.)

Fidelity Small Cap Independence FDSCX: D (Middle-of-the-road performance coupled with a relatively new manager and small-cap orientation make this fund a “no-go” for me.)

JPMorgan International Value I JNUSX: C (I like the fact that it’s Foreign, and Large, and Value, but I don’t like its performance at all. It’s too average.)

Morgan Stanley Inst Intl Growth Equity I MNWAX: D (Started in 2005, it’s too new.)

Morgan Stanley Inst Mid Cap Growth I MPEGX: B (I like the quality of management and their stock-picking ability, just a little bit doubtful they can continue their streak in the 2008. A solid fund.)

Oppenheimer International Bond Y OIBYX: A (Started in 2004, this fund is new and I would have immediately disregarded it if not for an OIBAX, which is the same fund with A-type shares, which has a longer history. This fund has blown its peer out of the water in the short- and long-term total returns. I also like the international exposure.)

Third Avenue Real Estate Value TAREX: D (What more is there to say: Real Estate!)

Vanguard Developed Markets Index VDMIX: C (It has minimal exposure to emerging markets and I don’t think “developed markets” will be that hot overall.)

Vanguard Extended Market Index Signal VEMSX: D (Started in 2006, it’s too new.)

Vanguard Inst Total Stock Market Index Inst VITNX: D (Performance is lagging, I don’t see any reason to hold this fund.)

Vanguard Small Cap Index Signal VSISX: D (Started in 2006, it’s too new.)

Vanguard Total Bond Market Index Signal VBTSX: B (Started in 2006, this fund very new, but so far it has done very well).

Western Asset Core Bond Institutional WATFX: B (Very steady growth, quality management, but in this fund lack of volatility also means average returns.)

Western Asset Inflation Indexed Plus Bond WAIIX: B (One of the better performing funds in it’s category. Managed by four managers since the inception.)

My 401(k) Mutual Funds: Part 6 of 6

Finally, this is the last of the six-part series detailing 18 mutual funds available in my 401(k) plan. (There are actually more funds to choose from, but other funds didn't have public information available for them, so I ignore them.) In the coming days (hopefully tomorrow!) I will post how I personally rank these funds in respect to each other and which funds I chose to allocate my 401(k) contributions to.

Vanguard Total Bond Market Index Signal VBTSX

Started In: 2006
Load: No
Yield: 5.02%
Annual Turnover: 64%
Size: $56 billion
Expense Ratio: 0.11%
Cost: $35 per $10,000 over 3 years
MS Stars: NR
Stewardship: B
Category: Intermediate-Term Bond
Management: Kenneth Volpert has been its manager since inception at the end of 2006
Performance: The fund has no performance history to speak of, but it is showing some promising signs.
Lipper: The Fund seeks to generate returns that track the performance of the Lehman Brothers Aggregate Bond Index, and will maintain a dollar-weighted average maturity consistent with that of the index. The Index measures investment-grade, taxable fixed income securities in the U.S.
Comments: It invests into US Treasuries (24%), Mortgage Pass-Thru (37%), and US Corporate (18%). It has 11068 holdings.

Western Asset Core Bond Institutional WATFX

Started In: 1990
Load: No
Yield: 5.25%
Annual Turnover: 432%
Size: $7 billion
Expense Ratio: 0.47%
Cost: $151 per $10,000 over 3 years
MS Stars: 4
Stewardship: NR
Category: Intermediate-Term Bond
Management: The fund has 5 experienced managers, 3 of whom have managed this fund since its inception. A lot of analysts support these managers.
Performance: This fund hasn't had a bad year as far as I can tell (since 1997). Although the returns aren't exactly stellar, the overall performance is good considering the steady growth. The fund has 10-year return of 6%, 5-year return of 4.8%, and 3-year return of 3.9%. This performance has earned ranks of #9, #29, and #58, respectively.
Strategy: In general, the fund is more aggressive than most of its peers. For example, management makes bolder duration adjustments (plus or minus 20% of its benchmark's duration) than many of the category's more conservative offerings. It also takes on added credit risk on occasion. Overall, though, it is a true core bond holding, with a focus on investment-grade bonds and a broadly diversified portfolio.
Lipper: The Fund seeks to maximize total return, consistent with prudent investment management and liquidity needs, by investing in a broad range of fixed income securities, to obtain the average duration specified for the portfolio. Assets growth has exploded since 2003.
Comments: This fund is an MS Analyst Pick. It has 36% in Cash, 56% in Bonds, and 9% in Other. The fund shorts a significant portion of the assets. It invests in AAA (80%) and BBB (11%) bonds; 35% in Mortgage Pass-Thru, 9% in Mortgage CMO, and 17% in US Corporate. It has a total of 1671 holdings with 53% of assets in top 10 holdings. This one can be considered to be a part of the portfolio due to its steady growth and high-quality management. Although it lagged category peers in 2007, it seems poised for a good run in 2008 with Fed further cutting interest rates,

Western Asset Inflation Indxd Plus Bd WAIIX

Started In: 2001
Load: No
Yield: 4.77%
Annual Turnover: 96%
Size: $0.76 billion
Expense Ratio: 0.25%
Cost: $89 per $10,000 over 3 years
MS Stars: 4
Stewardship: NR
Category: Inflation-Protected Bond
Management: Four seasoned managers have led since inception.
Performance: 5-year return is 6.8% which earns this fund a #9 rank among peers. In 2007 it returned 10.2%.
Lipper: The Fund seeks to maximize total return by investing primarily in inflation-indexed fixed income securities issued in the United States. The average modified duration of the Portfolio is expected to range within 3 years of that of its benchmark, the Lehman Brothers Treasury Inflation Notes Index.
Comments: Almost 10% in Cash. No stock holdings, 90% in Bonds with 11% being shorted. 95% of all bond investments are AAA. Invests into US Treasuries (15%) and TIPS (63%). Seems to be a steady-growing fund, although performance history isn't as extensive as I'd like it to be.

My 401(k) Mutual Funds: Part 5 of 6

Almost done, here comes the fifth installment of this series of posts:

Vanguard Extended Market Idx Signal VEMSX

Started In: 2006
Load: No
Yield: 1.31%
Annual Turnover: 16%
Size: $14 billion
Expense Ratio: 0.10%
Cost: $32 per $10,000 over 3 years
MS Stars: NR
Stewardship: B
Category: Mid-Cap Blend
Management: Donald Butler has managed it since inception.
Performance: The fund has virtually no history.
Lipper: The Fund seeks to track the performance of a benchmark index that measures the investment return of small- and mid-capitalization stocks. The Fund employs a "passive management" approach designed to track the performance of the Wilshire 4500 Completion Index.
Comments: Fund invests in Medium (52%), Small (31%), and Micro (11%) companies. It has zero in Cash. It has 3222 holdings.

Vanguard Inst Total Stock Mkt Idx Ins VITNX

Started In: 2001
Load: No
Yield: 1.71%
Annual Turnover: 8%
Size: $10 billion
Expense Ratio: 0.05%
Cost: $15 per $10,000 over 3 years
MS Stars: 4
Stewardship: B
Category: Large Blend
Management: Michael Perre has managed since 2005.
Performance: Fund lost 21% in 2002, rough start. Since then it posted 11.5% 5-year returns which rank it #22 among peers.
Strategy: This index fund tracks the MSCI U.S. Broad Market Index. Both indexes include nearly all publicly traded domestic stocks. It would be impractical to own each small company in the index, so, among the tiniest firms, management selects a representative sample. In an effort to boost returns by a few basis points, the manager uses various techniques, including securities lending.
Lipper: The Fund seeks to match the performance of a benchmark index that measures the investment return of the overall stock market. The Fund employs a passive management strategy designed to track the performance of the Wilshire 5000 Total Market Index.
Comments: It has virtually zero in Cash. It invests in Giant (42%), Large (31%), and Medium (20%). It has 3360 holdings. Bottom line: I don't see an edge, I don't see stunning performance, I'm not impressed.

Vanguard Small Cap Index Signal VSISX

Started In: 2006
Load: No
Yield: 1.38%
Annual Turnover: 24%
Size: $15 billion
Expense Ratio: 0.13%
Cost: $42 per $10,000 over 3 years
MS Stars: NR
Stewardship: B
Category: Small Blend
Management: Michael Buek has been its manager since inception at the end of 2006
Performance: The fund has no performance history to speak of.
Lipper: The Fund seeks to track the performance of a benchmark index that measures the investment return of small-capitalization stocks. The Fund employs a "passive management" approach designed to track the performance of the MSCI U.S. Small Cap 1750 Index, a broadly diversified index of stocks of smaller U.S. companies.
Comments: It has 1685 holdings.

My 401(k) Mutual Funds: Part 4 of 6

Fourth installment of 401(k) mutual funds' reviews:

Oppenheimer International Bond Y OIBYX

Started In: 2004
Load: No
Yield: 7.23%
Annual Turnover: 68%
Size: $10 billion
Expense Ratio: 0.54%
Cost: $180 per $10,000 over 3 years
MS Stars: 5
Stewardship: C
Category: World Bond
Management: Arthur Steinmetz has managed the fund since inception.
Performance: This fund is new, but so far it has performed well. In 2007 it returned 14%, while 3-year annualized return is 10.49% which makes it #1 in its category.
Strategy: This fund invests primarily in sovereign debt and provides investors with a lot of emerging-markets exposure. The fund also takes on substantial developed and emerging-markets currency risk and makes substantial use of derivatives to take currency and country exposures. Interest-rate sensitivity is usually kept close to its benchmark's.
Lipper: The Fund seeks high total return by investing primarily in foreign debt securities.
Comments: Has 28% in Cash, which is probably a good thing. 44% is in AAA bonds, 17% in AA, 25% in A, and the rest lower-rated bonds. It has 274 holdings with 25% of assets in top 10. I looked at the A share version of this fund, which has a longer history to speak of. The fund (OIBAX) is ranked #1 for 3-year, 5-year, and 10-year returns! While #3 for 1-year returns. In the past 8 years it didn't have a single negative year and from looking at the chart, they fund may have had a bad year in 1998, but even though it was only about a 10% dip, so I'm definitely impressed with this fund's performance!

Third Avenue Real Estate Value TAREX

Started In: 1998
Load: No
Yield: 1.91%
Annual Turnover: 19%
Size: $ billion
Expense Ratio: 1.11%
Cost: $353 per $10,000 over 3 years
MS Stars: 4
Stewardship: NR
Category: Specialty-Real Estate
Management: Michael Winer has been the manager since inception.
Performance: This fund didn't have a negative year since its inception in 1998 until 2007 when it lost 8.4%. Overall, it has performed well with a 5-year return of 17% and 3-year return of 8%. But by looking at category ranking, I see that it's rather in the middle of the pack ranking between 18 and 33.
Strategy: Like other Third Avenue offerings, this one seeks companies that trade at a discount to management's estimate of net asset value. The manager favors REOCs over REITs because the former can reinvest cash flow back into the business for growth. The fund often stashes more than 60% of assets in its top 10 holdings, which means it's among the most concentrated in the category.
Lipper: The Fund seeks long-term capital appreciation by investing at least 65% of its assets in equity and debt securities of well-financed companies in the real state industry or related industries or in companies which own significant real estate assets at the time of investment. This fund's rates have skyrocketed in the past few years.
Comments: Has 5.6% in Cash. It has 59% of assets in top 10 holdings. This fund invests in Large (49%), Medium (30%), Small (9%), and Micro (9%) companies. Its investment style is Blend-Growth. It has a total of 40 holdings. This is an MS Analyst Pick. This fund's performance relative to its peers isn't overly impressive, but I like its steady performance until now. Could a worthwhile pick once the real estate will start making a comeback.

Vanguard Developed Markets Index VDMIX

Started In: 2000
Load: No
Yield: 2.85%
Annual Turnover: 7%
Size: $3.9 billion
Expense Ratio: 0.27%
Cost: $87 per $10,000 over 3 years
MS Stars: 4
Stewardship: B
Category: Foreign Large Blend
Management: It doesn't have a manager, it's an index.
Performance: The fund only has a 7 year history, which so far shows double digit losses in 2001 and 2002. Although returns in the subsequent 5 years were pretty good, I would venture a guess that this fund isn't designed to withstand bear markets all that well. 5-year return is 19% and 3-year return is 15%, ranking it #29 and #50, respectively, among peers.
Strategy: This is a passively managed fund of funds that invests all of its assets in Vanguard European Stock Index VEURX and Vanguard Pacific Stock Index VPACX, with the majority going to the Europe fund. Its goal is to track the performance of the MSCI EAFE Index. It has minimal exposure to emerging markets. It does not hedge its foreign-currency exposure.
Lipper: The Fund seeks to track the performance of the MSCI Europe, Australia, Far East (EAFE) Index. And this fund's assets, also, have skyrocketed lately.
Comments: The fund has virtually zero in Cash and is 98% invested in stocks. Most significant sector holdings are: Financial Services, Consumer Goods, and Industrial Materials. The fund is heavily invested in the UK (22%) and Japan (20%) as well as in France, Germany, Australia and Asia ex-Japan. Fund has only two holdings: Vanguard European Stock Index (70%) and Vanguard Pacific Stock Index (30%). Bottom line: not a bad offering, but not now and not if I have a choice of a better-performing peer.

My 401(k) Mutual Funds: Part 3 of 6

This is a third installment of a six-part series listing my reviews of mutual funds offered by my employer's 401(k) plan:

JPMorgan International Val I JNUSX

Started In: 1993
Load: No
Yield: 1.37%
Annual Turnover: 92%
Size: $1 billion
Expense Ratio: 0.94%
Cost: $319 per $10,000 over 3 years
MS Stars: 3
Stewardship: NR
Category: Foreign Large Value
Management: Gerd Woort-Menker has been managing it for 7 years now.
Performance: It has returned 11.8% in 2007, 20.8% over 3 years, 23.8% over 5 years, and 9.4% over 10 years. 3-year records ranks #4, 5-year record is at #10, and 10-year is at "whopping" #65. It was negative (double-digit negative) in 2000, 2001, and 2002.
Lipper: The Fund seeks to provide a high total return from a portfolio of equity securities of foreign companies.
Comments: Only 1.5% in Cash. The fund ignores Software, Hardware, Media, Healthcare, Consumer Services, Business Services, and Utilities, while concentrating on Financial Services (36%!), Consumer Goods (13%), Industrial Materials (15%), and Energy (12%). Invests in Giant (61%), Large (28%), and Medium (9%) companies. Is mostrly concentrated in UK, Japan, Germany, France, and the rest of Western Europe. Has a total fo 69 holdings and invested 31.7% in the top 10 holdings.

Morgan Stanley Inst Intl Growth Equity I MNWAX

Started In: 2005
Load: No
Yield: 0.81%
Annual Turnover: ?%
Size: $0.02 billion
Expense Ratio: ?%
Cost: $850 per $10,000 over 3 years
MS Stars: NR
Stewardship: NR
Category: Foreign Large Growth
Management: Has managed it since inception 2 years ago.
Performance: The fund is new, so it has only two full years of performance: 27.9% in 2006 and 15.2% in 2007, which are not overly impressive for its category.
Lipper: The Fund seeks long-term capital appreciation, with a secondary objective of income. Under normal market conditions, the Fund invests at least 80% of its assets in equity securities of issuers from at least three different foreign countries.
Comments: The fund is similar iin its sector weighing to the peers except for a larger stake in Energy. Only 0.3% in Cash, has no room for new picks without selling its current stakes. Investos in UK/Western Europe, Japan, and Asia ex-Japan. Has 72 holdings 21.5% investted in the top 10 holdings. Botoom line is that this fund is too new and way too expensive for the category-average returns.

Morgan Stanley Inst Mid Cap Growth I MPEGX

Started In: 1990
Load: No
Yield: 0.49%
Annual Turnover: 64%
Size: $3.4 billion
Expense Ratio: 0.63%
Cost: $202 per $10,000 over 3 years
MS Stars: 4
Stewardship: C
Category: Mid-Cap Growth
Management: Dennis Lynch has been in charge for the past 6 years. So, he's at least partially responsible for the impressive 5-year returns.
Performance: This fund lhas ost money in 2000, 2001, and 2002. 3-year return is 15.4%, 5-year return is 19.8%, and 10-year return is 11.3%, these return rank this fund #6, #4, and #18, respectively. So, it basically does really bad in the bear environment, although roars back quite well during bull times.
Strategy: This fund's team, led by Dennis Lynch, looks for mid-cap companies with defensible business models and high returns on capital that generate significant cash flow. The fund is fairly concentrated and is willing to go wherever its best stock ideas take it. That means it will often look and act differently from its benchmark.
Lipper: The Fund seeks above-average long-term return (primarily through capital appreciation) relative to broad market indices, and to returns of other managers of mid-cap growth portfolios, through investments in the common stock of small and mid-size companies that have the potential for superior long-term earnings growth. Last time fund's assets peaked was in 2001 and is currently at the highest point in the past 5 years, although still not quite at the 2001 level.
Comments: Has 5% in Cash. Compared with its peers, it has relatively large stakes in consumer services, business services and financial services and rather low stakes in hardware, health care and industrial materials. Invests in Large (19%) and Medium (78%) companies. Has a total of 57 hldings, with 30% of assets in the top 10. Most of the top 25 names don't get me all excited, although I can't say I'm familiar with them all. Managers do seem to be solid stock-pickers, so I will keep my mind open in regard to this fund. Although, I'm suspicious of anything that has done really well during the past 4-5 years. Everything that goes up must come down, right?

My 401(k) Mutual Funds: Part 2 of 6

Fidelity Capital & Income FAGIX

Started In: 1977
Load: No
Yield: 6.33%
Annual Turnover: 37%
Size: $9.7 billion
Expense Ratio: 0.75%
Cost: $243 per $10,000 over 3 years
MS Stars: 5
Stewardship: C
Category: High Yield Bond
Management: Mark Notkin has been managing it since 2003. He's done well and he's supported by an extensive staff.
Performance: The fund has lost money in 2000, 2001, and 2002, but then roared back in 2003 with a 39% return. Although this fund (obviously) can be volatile it ranks at the in 3-year, 5-year, and 10-year returns among it's peers, taking third, forth, and fifth places, respectively. 5-year annualized total returns are 12%, which is awesome for a bond fun.
Strategy: This opportunistic high-yield fund typically takes on more risk than its average high-yield category peer. Management often dabbles in distressed securities and equities while primarily focusing on bonds rated B. The fund's equity stake has ranged as high as 18% of assets. It will also own bank loans.
Lipper: The Fund seeks to provide a combination income and capital growth. The Fund invests its assets in equity and debt securities of any type. Ranked best (5) in Consistent Return, Total Return, Expense, and Tax Efficiency. Ranked lowest (1) in Preservation. Assets have skyrocketed from $2.5 billion in 2003 to $7.5 billion (per Lipper) in 2007. This means that the fund is probably at its peak now, and you never want to be at anything's peak.
Comments: It holds 14% in Cash, 17% in Stocks, 59% in Bonds, and 10% in Other. Virtually all investments are made at bonds rated BB or lower; it invests 76% in US Corporate Bonds. It's not concentrated with 333 holdings and only 10% of assets in top 10 holdings. This fund is aggressive, but also rewards investors for the risk with a considerable upside. This fund is possibly worth holding after the current credit/suprime crisis, since it performs very well during market rallies. So, it may perform well in late 2008/early 2009?

Fidelity Contrafund FCNTX

Started In: 1967
Load: No
Yield: 0.57%
Annual Turnover: 76%
Size: $81 billion
Expense Ratio: 0.89%
Cost: $287 per $10,000 over 3 years
MS Stars: 5
Stewardship: C
Category: Large Growth
Management: Domestic-Equity Fund Manager of the Year. Will Danoff is a well-respected manager who has been leading this fund since 1990.
Performance: This fund has lost money in 2000, 2001, and 2002, but has shown impressive results since then. This fund is ranked #4 for 3-, 5-, and 10-year periods. Its 5-year annualized return is 16.35%. Impressive as it is, the fund has done very well in the bull market, but not so in the bear market and that is what is expected in the near future.
Strategy: It has been more conservative than most of its large-growth rivals in recent years, with big underweightings in racy sectors such as technology.
Lipper: The Fund seeks capital appreciation. Fidelity Management & Research invests the Fund's assets in securities of companies whose value they believe is not fully recognized by the public. Assets are at all time high, last high was in 2000 (hint, hint). Ranked best (5) in Preservation, Total Return, Expense. Ranked (2) in Tax Efficiency. Ranked (4) in Consistent Return.
Comments: Top 5 holdings are Google, Apple, Berkshire Hathaway, HP, and ExxonMobil (of which, Google and Apple are overpriced, Berkshire Hathaway will probably return 15-20% in 2008, HP and ExxonMobil will more than likely have a return in the double digits). Has significant stakes in Hardware, Healthcare, Business Services, Financials, Consumer Goods, Industrial Materials, and Energy (meaning that it's ignoring Software, Media, Telecom, Consumer Services, and Utilities). This fund has almost 11% in Cash. Fund invests in Giant (58%), Large (25%), and Medium (15%). Fund has 26.5% of assets in the top 10 holdings with a total of 339 holdings. MS doesn't suggest that investors add to their stake in this fund because of it's enormous size and manager's increased workload managing another large fund.

Fidelity Small Cap Independence FDSCXStarted In: 1993

Load: No
Yield: 0.0%
Annual Turnover: 84%
Size: $2.4 billion
Expense Ratio: 0.81%
Cost: $322 per $10,000 over 3 years
MS Stars: 4
Stewardship: C
Category: Small Growth
Management: Richard Thompson has only managed this fund for two years. Maybe he'll perform better than his predecessors, maybe not.
Performance: Over the past 8 years, it was negative only once in 2002 (-21%), but it has been rocky before then though. 1-year return is -1.8% and 5-year return is 13.7%. Such performance puts it in the middle of the pack, pretty unimpressive. Not terrible, but I'm impressed by this return, especially considering the small-cap risk and how well other small caps have done over the same period.
Strategy: This fund applies a growth-at-a-reasonable-price strategy to the small-cap universe. Manager Richard Thompson has worked overseas and will leverage his knowledge of those markets, spicing this fund up with some foreign exposure. Thompson will hew fairly closely to the Russell 2000 Index in terms of sector weightings and will employ Fidelity's favored valuation metrics, such as price/earnings and enterprise value/operating earnings.
Lipper: The Fund seeks capital appreciation. Normally invests at least 65% of assets in securities of companies with small market capitalizations. Uses computer-aided quantitative analysis of historical earnings, dividend yield, earnings per share and other factors supported by fundamental analysis to select investments. Fund lagged S&P 500 for the past 11 years. Fund assets have skyrocketed in the past two years: at first doubling in 2006, and then tripling in 2007.
Comments: 5% in Cash. 21% of assets in top 10 holdings. Invests in Medium (43%), Small (42%), and Micro (15%). MS analyst pretty much sums up my opinion of this fund in the following: "This fund looks promising, but investors can find more-proven options."

My 401(k) Mutual Funds: Part 1 of 6

So, as promised, here is Part 1 of brief reviewes of my 401(k) mutual funds.

American Funds Grth RGAFX

Started In: 2002

Load: No

Yield: 1.26%

Annual Turnover: 26%

Size: $193.5 billion

Expense Ratio: 0.35%

Cost: $122 per $10,000 over 3 years

MS Stars: 5

Stewardship: B

Category: Large Growth

Management: Ten experienceed managers working independently of each other, but with the same strategy.

Performance: Not bad. 11% total return in 2007 and 14.3% 5-year annualized return (which ranks #9 among peers).

Comments: MS doesn't recommend new purchases. Not a terrrible fund, but rather average. Weighed down by its enormous size. Portfolio has a very large number of holdings, even compared to its peers - this makes it less volatile, but also too tame. A lot of familiar holdings such as: Google, Microsoft, Oracle, Cisco, GE, Medtronic, AIG, Caterpillar, etc.

DFA Emerging Markets Value I DFEVX

Started In: 1998

Load: No

Yield: 1.84%

Annual Turnover: 9%

Size: $7.8 billion

Expense Ratio: 0.63%

Cost: $202 per $10,000 over 3 years

MS Stars: 5

Stewardship: NR

Category: Diversified Emerging Mkts

Management: One manager, Karen Umland, has managed it almost since inception.

Performance: 45% return in 2007 and 45% 5-year return (ranks #1 among peers in 5-yr).

Comments: 41% in Industrial Materials and 18% in Financial Services. Invests in Large-Mid Value. Almost 0% in Cash. Negative in 2000, 2001, and 2002 (lost a scary 34% in 2000!). In South Korea, India, Taiwan, South Africa, and Brazil (NOT in North America, UK/Western Europe, or Japan). Very low annual turnover. The fund doesn't show individual stock holdings, only Dimensional Emerging Markets Val Series.

DFA U.S. Small Cap Value I DFSVX

Started In: 1993

Load: No

Yield: 0.97%

Annual Turnover: 27%

Size: $8.7 billion

Expense Ratio: 0.53%

Cost: $170 per $10,000 over 3 years

MS Stars: 4

Stewardship: NR

Category: Small Value

Management: One manager, Robert Deere, has managed it almost since inception.

Performance: The fund has done pretty well over time, with negative years in 2002 and 2007 (about -10% each time). But 5-year return is 15.7% which makes it #4 in ranking among peers.
Strategy: It screens the smallest 10% of the exchange-listed universe for stocks with low price/book value ratios. That typically amounts to just fewer than 1,500 stocks from across all sectors and industries. Since its early 1993 inception, it has returned 15%, beating the S&P 500's 11% gain and the rival's near 13% climb.

Comments: Large concentrations in Financials and Industrial Materials, 22% in each one. Virtually zero assets in cash. 59% in Small and 34% in Micro. The fund doesn't show individual stock holdings, only Dimensional U.S. Small Cap Value Series. The fund is considered top-notch in its category and is managed by an advisory firm that has a solid reputation in this niche, but the wave it rode is on the way down in the choppy market conditions that are expected in 2008. Fund had negative return in 2007 and I don't think it will perform all that great in 2008, even if it stays in the black. It is certainly worth considering once the small-caps will make a come back, which could as soon as 2009.

My 401(k) Mutual Funds; Upcoming Interest Rate Cut

Since the stock market is taking a dive for the most part, I'm still paying more attention to the mutual funds.

I've finally went through the 401(k) mutual funds offered by my employer and will be posting my findings in a 6-part series. I'm breaking up 18 funds into 6 three-fund postings to make it more readable. Some reviews are more in-depth than others, depending on how much information was available for a particular fund. This is especially the case for the funds that are new. I have no idea why a 401(k) administrator would pick funds with virtually no history to speak of, it just doesn't make any sense to me. Of course I can of think of reasons for such picks, but none that would benefit the plan participants. In any case, that is what's coming up, along with my final choices (which are a bit unusual, but I had my reasons - you'll see!).

Also, now that I'm done with the 401(k) mutual funds, I will be going through the entire mutual fund universe to find funds for a non-tax-advantaged account.

While I'm here I might as well share my thoughts on the interest rate environment. There has been talk of Fed cutting interest rates before the next meeting as well as during that meeting (some people expect a total interest rate cut of 1%??). I don't think the situation is that dire and if the Fed will make a move before the next meeting it will send a strong signal that the economy is very weak and will do more harm than good as such a signal will support panicky investors' outlook. What I believe is the most likely scenario is that there will be a 50bps (0.5%) interest rate cut made at the January 30th Fed meeting. This cut is already highly expected by the markets so there should be no sudden spikes.

On a side note, Firstrade just e-mailed me that it will send me a free t-shirt! I've signed up with them back in December, but so far has made no trades because of the unfavorable market conditions. I wonder if they'll be sending gifts on a monthly basis, wouldn't that be nice?