I don't usually muddle with my portfolio but this market down-turn has given me the opportunity to examine the character of my mutual fund holdings. The first thing that I noticed is that my star fund (Mutual Series Discovery) which I bought at inception, is not fulfilling its role as a value-oriented fund that would preserve capital in a down market. Soon after it was bought by Franklin their star manager, Michael Price, removed himself from day-to-day operations so it is basically a "new" fund that has lost more than the market and most competitors. It has been a wonderful five years but I am considering leaving the fund and any comments on this decision are welcome.
The second thing that I noticed was that most of my funds "track" the market. This is great when the market is going up but in months like this... So I've been looking at the R-squared values of funds which measure how well a fund tracks the S&P500.
This led me to look for a fund that would take the place of MDISX and possibly make a home in my ROTH-IRA. I wanted something that didn't necessarily track the S&P 500 (yet still goes up, of course) and provided stability in down markets. An article in Individual Investor (sorry for the plug!) mentioned two funds which invest in companies with growing dividends; T. Rowe Price Dividend Growth (PRDGX) and Fidelity Dividend Growth (FDGFX). These funds are perfect for my ROTH because the dividends will compound tax-free and the stock holdings allow for capital appreciation. Both have done well but FDGFX has a new manager with only a year tenure. There are a handful of similar funds with mixed results. Of the no-loads Scudder also has one that is only weeks old. It has been my experience that new funds with tested managers tend to outperform so I will likely go with Scudder because My ROTH is in Waterhouse and they allow trading of funds with no transaction fees.
Well, that is my basic plan. I'm opening myself to comments because I don't make adjustments to my portfolio very often. Unless a fund that I hold no longer serves the purpose for which it was bought, of course. Comments, opinions, ideas, suggestions very welcome!
Thanks,
John |
