When helping clients configure their retirement portfolios, Eric Grant often likes to suggest mutual funds and exchange-traded funds (ETFs) in groups of threes. Grant, managing partner and financial adviser with Polaris in Chicago, calls these groupings â€śtriads,â€ť which consist of funds that work well together because they have little or no overlap in their underlying investments.
â€śOur triads are fund combinations that we feel are long-term purchase-and-hold-opportunities, where we feel that the funds work well together, and will complement each other in market swings,â€ť says Grant, who believes now is a great time for investors to start ramping up their contributions. â€ś2011 will potentially be the start of a market incline. Adjust your budget to pour some money into the market. Ride it up,â€ť Grant says.
Recently, Grant talked to BLACK ENTERPRISE about three funds heâ€™s recommending to clients in 2011.
1. ARIEL APPRECIATION FUND (CAAPX)
â€śBy some peopleâ€™s measures, midcap funds have outperformed all other categories of mutual funds over the last 15 years. I like this fund, first, because itâ€™s midcap. Second, itâ€™s had the same portfolio managerâ€”John Rogersâ€”for more than 20 years. So, thereâ€™s a consistency and predictability to the fund. Itâ€™s a Warren Buffet-inspired fund. That means itâ€™s made up of companies whose businesses the everyday man can understand. Its top 10 holdings include Viacom, Northern Trust, Accenture, and drug company Baxter International.â€ť
1-year return: 21.44%
5-year return: 4.33%
10-year return: 7.37%
Minimum initial investment: $1,000
Expense ratio: 1.18%
2. AMERICAN FUNDS GROWTH FUND OF AMERICA (AGTHX)
â€śThis fund is an old one, founded in 1973. Itâ€™s managed not by one person but by a committee between eight and 10 managersâ€”all of whom have more than 25 years in the business. These committee members donâ€™t adhere to common wisdom, and they donâ€™t engage in â€śstyle drift,â€ť which means they stay true to the fundâ€™s large-cap growth intentions. They never have more than 25% of their investments outside of U.S. companies. Expenses are very low because this fund doesnâ€™t have a lot of turnover. Among the fundâ€™s top holdings are Apple, Google, Microsoft, Oracle, and Union Pacific Corp. They hold a nice amount of gold too. If you look at historic rankings, youâ€™re always going to see this fund near the top in terms of long-term performance.â€ť
1-year return: 12.78%
5-year return: 2.24%
10-year return: 2.24%
Minimum initial investment: $250
Expense ratio: 0.69%
3. RYDEX S&P MIDCAP 400 PURE GROWTH (RFG)
â€śThis ETF is a relative senior in the ETF world. Itâ€™s an index fund with low expense and a 9% return since 2006. Thereâ€™s nothing sexy about it. It just follows the top 400 Midcap stocks in the S&P 500 index. Thereâ€™s not a lot of movement or volatility. Top holdings are Netflix, Green Mountain Coffee Roasters, and F5 Networks. Itâ€™s always good to have an index fund like this in your portfolio.â€ť