WHAT'S NEW? Our Latest Updates!

New AARP Fund

05/26/06 -

It's a match made in mutual fund marketing heaven.

AARP, the organization dedicated to the interests of persons who aren't quite as young as they used to be, launched its first three mutual funds and the end of 2005. And you don't have to be over 50 – the minimum age to join AARP – to invest in them.

AARP's Conservative, Moderate, and Aggressive Funds are geared toward investors with risk tolerances ranging from, well, conservative to aggressive. Each fund invests in a different mix of three underlying index funds managed by State Street Global Advisors. Those indexes track U.S. stocks through the MSCI U.S. Investable Market 2500 Index, international stocks through the MSCI EAFE Index, and U.S. Bonds through the Lehman Brothers Aggregate Bond index.

According to AARP, the aim of the new no-load funds is to make the investment process easier in hopes of encouraging people to increase the amounts they invest.

April 2006 performance review

Bonds took another dive in April – a move that appears to be continuing into May. Long term U.S. government treasury bonds – the most interest sensitive bonds – fell nearly 2% in April, after a 3% drop in March. Bonds are down just over 5% for the year, and now have a three year average return below 3% (or only slightly above what you would have received in a good money market fund over the same period).

Viva la Revolution!

05/09/06 -

Newly elected socialist/populist Bolivian President Evo Morales sent military troops to natural gas facilities on May 1st, claiming state control over the country’s resources. Oil companies were given 180 days to renegotiate contracts with the country – almost literally at gunpoint.

Such a move is bad for the global “oil imperialists” of the world like Exxon Mobil, Petrobras and Total S.A. It doesn’t bode well for investors in Latin American mutual funds like T. Rowe Price Latin America (PRLAX) – our current Latin American fund category favorite.

When socialism is on the march it’s best to get your money out of the way.

Oils Well That Ends Well

In case you’ve missed the nonstop media coverage, gasoline prices are again approaching $3 a gallon. Does this “crisis” situation offer any investment opportunities? Can it derail the economy and stock market? And why is gas so expensive anyway?

A Gusher of a Bad Idea

04/28/06 -

A lot of good has come out of the exchange traded fund (ETF) revolution. ETFs have drawn billions of hot money dollars out of ordinary mutual funds, helping longer-term mutual fund investors’ returns by giving the fund manager a more stable asset base. ETFs are more tax-efficient than ordinary mutual funds. Even better, low-cost ETFs have put some pressure on fund fees.

Ask MAX: Capital Gains Quickies

04/24/06 -

Andrew from Minneapolis asks: 'I'm a mutual fund investor who was hit with taxes on my fund holdings this year (after a few years without paying any). Frankly, I'm not entirely clear on what a capital gains distribution is. I asked my accountant and he didn't seem to be able to explain it to me. Can you help?'

In most cases, mutual fund investors haven't had to worry about their fund’s tax bills since 2000. Weak market returns from 2000-2002 meant that there weren't any capital gains to distribute in the early part of the decade, and the losses many funds realized offset some of the gains made in the following years. But strong performance of many funds from 2003 to 2005 has finally caught up with fund investors, creating a rough tax burden for many of them this year. In 2005 Lipper estimates fund investors paid a whopping 58% more in taxes on fund distributions than in 2004.

We love mutual funds. Mutual funds provide cheap and easy investment diversification, they're easy to get in and out of, they're highly regulated, and they allow investors access to expert financial guidance at a low price. As investments go, we think that mutual funds are far and away the best available for the vast majority of investors in America.

But there are a couple of things about mutual funds that we don't like: Fund investors never know exactly what they're invested in, some mutual funds charge excessive fees, and worst of all, mutual funds sometimes hit investors with large and unexpected taxable distributions.

march 2006 performance review

Bonds took a dive in March. The roughly 3.5% hit to long-term treasury bonds was the worst hit to bonds since April 2004. The Federal Reserve’s rate-increasing campaign to fight inflation (inflation they may have created) finally caught up with longer-term bonds.