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RVB's Market Musings

What began here as an avenue to interact and learn has far exceeded those goals.

If you are a prospective employer, please consider this site a place where you can see my passion for investing...

Thursday, June 16, 2005

Buy 'em and go on vacation!

My aplogies for the lack of blogs recently. The good news is that little has happened in the markets since my last entry. I've been busy, and the markets have been fairly boring.

Today I want to talk about two great mutual funds that you can buy, and then feel comfortable enough to not check up on them very often. Both of the funds have similar investing styles. Niether of them will likely beat the S&P 500 when the markets are hot. But, when the markets are cold, these funds earn their keep, protecting their gains by switching to conservative investments like bonds.

1) The first is the T. Rowe Price Capital Appreciation fund (PRWCX). T. Rowe Price is a leader in the fund industry, and their philosophy is not to charge its customers ridiculous expense fees. For a fairly actively managed fund, the expense ratio is a low 0.78%, while yielding 1.46%. The manager has recently turned over, however, the strategy is still in tact. Since Jan 1, 2001 the fund is up about 60%, versus just 10% for the S&P. Like I said, when the markets are cold is when this fund earns its keep. Morningstar gives it a 5-star rating (its highest rating) and the fund only has an 18% turnover rate. If you look at a 10-year return, the fund is up about 270%, versus only 200% for the S&P 500. Until the market top of 2000, the fund had slightly underperformed the index, but the fund successfully cashed in its chips near the top, and has a history of good management not getting too overweight in momentum sectors that can come crashing down (like internet stocks in the bubble).

2) The second fund is the Vanguard Wellington fund (VWELX). This fund has a similar strategy. It is a little bit more actively managed, with a 24% turnover ratio, which is still not very high. It also underperformed the overall S&P 500 during the great years of the mid-to-late 90's, but the fund has done very well during the thin years. The fund has a lower expense ratio than the first fund mentioned at 0.31%, but you'll notice that this fund hasn't outperformed the S&P 500 by as wide of a margin. It checks in at about 220%, vs. 200% for the index, vs 270% for the T. Rowe Price fund above.

Take a look at both of them. They're similar in nature and very, very good long-term investments. In fact, in my opinion, they're two of the best mutual funds in the world - because they do what you want - they make money, and they don't require much monitoring.


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