New Millennium, New Funds

B.E. finds 12 of the best bets for the new year-and beyond

continue to combine convertible bonds-a security in which the issuing company grants you the right to swap your bond for shares of common stock at a predetermined price-with junk bonds, a style that has made her a star in the high-yield field. “The fund is likely to have a competitive yield but not the highest current yield,” Dziubinski says. “Instead, it seeks bonds with the potential for capital appreciation as well, in order to deliver higher total returns to investors.”

Delivering higher total returns certainly is a worthy goal, one that Morningstar’s dozen may well attain. Does Dziubinski feel comfortable enough in these picks to put her own money at risk? “I bought TIAA-CREF Growth & Income as a gift for my godchild,” she says, “and I’ll be buying Oakmark Select the second it becomes available in Morningstar’s 401(k) plan, which is soon.”

As you decide whether to take a chance on these or other newcomers, you may want to adopt the tack of Sharon and Darryl Ward. Even though they work with a financial planner, the Wards study every investment before they part with a single buck of their hard-earned savings. “We want to know the [fund] manager’s investment goals,” says Sharon, “and make sure that we’re comfortable with them. No one else can make that decision for us.”

Or, in the final analysis, for you.

The Dynamic Dozen

B.E. asked Morningstar to identify the next generation of hot mutual funds. The 12 investments below, selected by Morningstar Fund Investor’s Susan Dziubinski, represent those that will have the most promise in years to come.

TOTAL RETURNS

FUND

TICKER

CATEGORY

YEAR-T0 DATE

12 MONTHS

THREE YEARS

MINIMUM INITIAL INVESTMENT

TELEPHONE

Artisan Small Cap Value (ARTVX) Small Value 12.69% 17.87% N/A $1,000 800-344-1770
Baron Growth (BGRFX) Small Growth 17.57 56.00 19.35% $2,000 800-992-2766
Longleaf Partners International (LLINX) Foreign Stock 26.58 N/A N/A $10,000 800-445-9469
Marsico Focus (MFOCX) Large Growth 15.93 51.99 N/A $2,500 888-860-8686
Masters’ Select Equity (MSILXO) Large Blend 16.65 46.03 N/A $5,000 800-960-0188
Metropolitan West Alpha Track 500 N/A*** Large Blend 9.34 46.13 N/A $5,000 800-241-4671
New World* (NEWFX) Foreign Stock N/A N/A N/A $1,000 800-421-9900
Oakmark Select I (OAKLX) Mid-Cap Value 8.80 43.47 N/A $1,000 800-625-6275
Third Avenue High Yield** (TAHYX) High Yield Bond 13.84 15.55 N/A $1,000 800-443-1021
TIAA-CREF Growth & Income (TIGIX) Large Blend 9.39 41.49 N/A
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