New Millennium, New Funds - Black Enterprise

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Black Enterprise Magazine July/August 2018 Issue

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For Sharon and Darryl Ward, the road to wealth-building is paved with mutual funds. “We’re in our 30s, so we have many years of investing before we retire,” says Sharon, a financial programs specialist with the U.S. Treasury Department in Birmingham, Alabama. “Therefore, we invest mainly in stocks and stock funds where the long-term returns likely will be superior. I personally like to invest through mutual funds because I feel the diversified holdings provide safety.”

Once a conservative investor, Sharon has evolved into a moderate risk-taker. On the other hand, her husband, Darryl, a mortgage banker, is a more aggressive fund picker. “We don’t own a lot of small-company or international stocks,” he says, “so our portfolio is tilted toward large- and mid-caps. I like to see a lot of technology stocks in the portfolio before I invest: I know they’re volatile, but I think the long-term returns will be worth the risks.”

As a result, the Wards have crafted an investment program that is a mix of moderate and aggressive funds. And as they have structured their portfolio, they have placed a high premium on consistent returns. “A few years ago, a specialized technology fund was suggested to me,” says Darryl. “However, it had just returned 112% the previous year, so I was reluctant to invest because I didn’t think it could repeat that performance. Instead, I invested in Fidelity Select Software and Computer Services Fund (FSCSX), which had a record that was good but not as great.” Fortunately, he didn’t regret that choice. Since he’s held the investment, Fidelity Select has gained more than 30% per year.

Many investors go through the same arduous process as the Wards when it comes to figuring out the next hot fund. The more misguided, however, conduct research akin to throwing darts at a board. So just how can you truly determine which funds will give you the best bang for your buck? To help you make this decision, black enterprise consulted Morningstar, the Chicago-based mutual fund tracking service. Susan Dziubinski, editor of Morningstar Fund Investor, a monthly newsletter, has reviewed and helped us prepare a list of 12 hot mutual funds for the new millennium (see chart). OK, they may not last a thousand years. But the process that she used to select the funds is one that can easily be passed on to any generation of investors.

Instead of established funds, Dziubinski is drawn to young ‘uns-those vehicles that have yet to establish track records of more than a half decade. Why new funds? “Young, relatively small funds have some advantages,” she says. “They may be more flexible than large, established funds, so they can take advantage of emerging trends.”

Indeed, some of the funds on her list have produced a stellar performance. With mouth-watering 12-month returns as high as 98%, a number of them have outdistanced the Standard & Poor’s 500.

Other factors for investors to consider: many of these young guns offer tax breaks. She maintains that “when it comes

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