It’s A Family Affair

Judith Aidoo

to Morningstar, the group has averaged an annual return of about 17.2% over the last five years.

Growth and income funds are more balanced in their approach. They not only target stocks of companies that are expected to grow earnings, but look for companies that pay dividends, a sign that business is not only robust, but stable. Not surprisingly, since these funds involve less risk, they provide somewhat lower returns. Morningstar outs the group’s five-year average annual return at 17.24%.

Aggressive growth funds are a spicier version of growth funds. They aim for stocks of companies that are growing earnings extremely quickly, a fact that should be ultimately reflected in their share price. Funds of this sort will probably gravitate to stocks in industries such as telecommunications or biotechnology, where overnight advances can make or break fortunes in a matter of months, if not weeks. Aggressive growth funds are even more volatile than growth funds, but hold the promise of impressive gains under the right conditions. Morningstar puts the group’s average annual return at approximately 17.14% over the last five years.

International funds invest in companies around the world, but will often target U.S. firms as well. The rationale for investing beyond the U.S. economy is straightforward: while our economy is growing at approximately 2.5% per year, there are a number of international markets in Asia, Africa, Latin America and Europe that are growing at rates in excess of 5% per annum. Morningstar lists the group’s average annual return for the last five years at 13.89%.

Diversifying a portfolio over several mutual funds can be easier said than done. But Vincent and Lynne Toye of South Orange, New Jersey, have found that investing in large fund families makes it a far easier proposition. “I think large fund families have established track records and, by definition, offer many fund choices,” says Vincent, a vice president at Union National Bank. “That makes it easy to move money if any one fund’s performance makes me unhappy.”

Vincent and Lynne, both 33, reviewed about five different mutual fund companies, focusing on large mutual fund groups. It was no small matter; the couple was looking to invest in funds with an average annual return of 12% over the last five years to get a head start on saving for the college education of their three-year-old son, Chester. And while they have a combined income of $125,000 a year, they need to get more bang for their buck considering the amount they spend on their son monthly. Besides that, they’ve also set lofty goals, such as furnishing their home and saving for retirement.

After three months of research, Vincent and Lynne settled on two families–Putnam and Evergreen. They channeled 85% of their investment portfolio into funds offered by both companies. Vincent says Putnam, while charging a sales load, has a roster of solidly performing offerings such as the New Opportunities Fund, which has averaged a 19% total return. It’s a small cap, aggressive growth vehicle that while riskier

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