Asset Allocation Comeback

Sticking with a long-range fund strategy will be critical in today's investing environment

to invest my money.” Andrews, who says he’d eventually like to hunt and fish as long as he stays healthy, says that he’s “in no rush to retire” now. He plans to keep working for a while and keep investing in high-quality mutual funds.

Although Andrews researches some mutual funds on his own, he also relies upon leads from Raleigh Kennedy, a Phoenix accountant and financial advisor who is affiliated with First Global Capital Corp., headquartered in Dallas. “For an investor like Jay [as Andrews is known], who’s about 10 years from retirement and has accumulated some assets, I generally recommend from eight to 10 funds, with the focus on equities,” Kennedy says.

He favors such fund families as State Street Research (its Aurora Fund is a small-cap standout), Franklin-Templeton for municipal bonds (which pay tax-exempt interest), and Davis for specialty funds such as Davis Financial. Kennedy also likes Oppenheimer for domestic equity funds such as Oppenheimer Growth and Oppenheimer Main Street Growth & Income, and Oppenheimer Global fund offers international exposure. He doesn’t usually recommend specialized technology funds since many diversified mutual funds have some tech holdings.

Kennedy isn’t too concerned with recent choppiness in the stock market. “If you have new money to invest, each price drop is a buying opportunity. The economy is doing fine and the market probably will boom when [Fed Chairman Alan] Greenspan stops raising interest rates. Rather than focus on the daily news, trying to jump arou
nd and time the market, you should pick funds carefully and stay with them for at least five years,” he adds.

A diversified approach to investing is advocated by Harvey Hoskins, 48, a CPA in Nashville, Tennessee, who has been investing regularly in two stock funds, MFS Emerging Growth and Fidelity Magellan, for many years. He practices one of the tried-and-true tenants of investing-dollar cost averaging. “I try to invest at least 10% of my income every month, so if the market goes down my money buys more shares.”

Hoskins says he has invested in well-managed funds that have helped pay for his children’s college bills and that he expects they will help him save enough for retirement, too. “Every time I’ve tried to make big money overnight, I lost money instead, so I’ve discovered a conservative approach is better.” Hoskins also invests his 401(k) money in the BlackRock family of funds, including BlackRock Small-Cap Growth Portfolio.

Unlike Andrews and Hoskins, some mutual fund investors are totally green. “Before I was divorced, my husband handled all of our finances,” says Sandra Schneller, 38, who works at a university near her Chicago home. “After I became responsible for the money I wanted to do something besides leave it in the bank; but I didn’t know where to start.”

Help came from a workplace seminar with guest speaker Eric McKissack, manager of Ariel Appreciation Fund, one of three mutual funds managed by Ariel Capital Management Inc., a Chicago-based black asset management firm. “During his presentation, [McKissack] answered a lot of my

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