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03/30/07 - New Investors

You want to start building a mutual fund portfolio, but you don't have the $3,000 or so you need to meet most funds' minimum initial investment requirements. John Waggoner in USA today finds two no-load funds with minimum investments of just $500, one of which, Homestead Value, is a MAXadvisor Favorite:

Excelsior Mid-Cap Value and Restructuring (UMVEX) ($500 min/$250 IRA)

Homestead Value (HOVLX) ($500 min/$250 IRA)

He also reminds us that T.Rowe Price offers entrée to many of their funds for as little as $50 if investors agree to participate in an automatic investment plan, wherein a certain amount is deducted each month from contributor's bank account and invested in the fund.

Buffalo, Artisan, and Weitz (among others) also accept reduced initial investments from automatic investment plan participants.


Note: We're frankly not sure why Waggoner included Hennessy Cornerstone Growth (HFCGX) ($2500 min/$1000 IRA) and USAA Capital Growth (USCGX) ($3000 min/$1000 IRA) in an article about low minimum funds as these fund's minimums are certainly no lower than average. If you can figure it out, let us know by posting a comment.

See also:

Where to Start
Ask MAX: Can I build a fund portfolio with just $17,000?
Ask MAX: Investing $20 a month?
Ask MAX: Where do I start?

Business Week's Best Managed Funds List

Business Week published their list of the best managed mutual funds, chosen after "in-depth, face-to-face interviews with managers to quiz them on investment practices." The winners are:


Don't Buy Top Ranked Funds

We've said it before, and we'll say it again: when shopping for mutual funds, resist the urge to purchase top performers.

Given the scads of mutual funds out there, investors might be tempted to turn to the want ads rather than sort through heaps of funds in hopes of finding a good match. More often, befuddled investors depend on fund rankings to bring a cool empirical eye to their search. But those who invest solely based on rankings risk disappointment.

'Using historical top quartiles to predict top quartile performance is a bit like rolling the dice,' said Srikant Dash, an index strategist at Standard & Poor’s Corp. S&P found in a recent study that few funds that ranked among the top quarter or even top half of their peers managed to consistently maintain their performance.

In the past five years, only 13.2 percent of large-cap funds, 9.9 percent of mid-cap funds and 10 percent of small-cap funds were able to remain ranked among the top half of funds for the entire period.

The top 25 percent ranking proved even more daunting a challenge, with only 3 percent of large-cap and 2.5 percent of mid-cap funds staying in that zone for five straight years. Stats for small-cap funds were even more grim: None was able to hold onto a top 25 percent ranking for the entire period.

'The numbers are similar to what would happen if you just pick a fund randomly,'" Dash said.


Buying the funds at the top of this year's performance chart is step one of the all-to-common buy-high/sell-low cycle that is probably responsible for destroying more fund investor wealth than loads, high fees, and manager ineptitude combined (step two is selling that fund after its almost inevitable subsequent poor performance).

International Underdogs

Morningstar's Fund Spy lists three quality international funds that had a tough 2006 but that their analysts think will perform well going forward:

Today, we'll take a closer look at three such laggards that we think continue to be superior offerings, as their proven long-term concepts and people remain in place and their outlook for future success is positive."

Their picks are:

MAXfunds gives UMB Scout International a MAXrating of 82, the Mainstay ICAP International Fund a MAXrating of 88, and Masters Select International Fund a MAXrating of 69. Master International is currently closed to new investors. For a list of our highest rated International funds, click here.