I don’t often look at mutual fund teasers, but there are several folks out there who write newsletters advising on mutual funds — which makes sense, since there are many more mutual funds than there are US-listed companies (not counting all the pink sheet and OTC fellas). Some of them even focus specifically on one of the big fund families — like Vanguard or Fidelity — and advise their subscribers about how and when to move in and out of various funds in those families.
I personally wouldn’t ever subscribe to one of these — I think the free services for screening mutual funds (or cheap ones, like Morningstar’s), and the excellent magazine annual reports on mutual funds, provide plenty of ways to easily select appropriate funds for yourself, but I can certainly see that some folks would like the very direct hand-holding service. Investing in mutual funds is almost always much less risky than investing in individual stocks, of course, so I don’t feel like I need the expertise of a newsletter to steer me away from fund risk, and the things I really hate, like high fees and newbie managers, are pretty easy to suss out on your own.
That said, the Gumshoe is an equal opportunity sleuth … and a reader forwarded me an email from by Dan Wiener, who puts out The Independent Adviser for Vanguard Investors, teasing us about “Three Mutual Funds Vanguard Wants to Keep Secret.” (“Sale price” at the moment is $100 a year, should you wish ). And to be fair, though this isn’t the kind of service that interests me, he does claim to significantly outperform the “average” Vanguard investor. And I do have some Vanguard funds in one of my retirement accounts.
So what are these three “secret” funds? And why on earth would Vanguard want to keep them secret?
#1: “The Best Safe Haven for 2007”
This one keeps 30-40% in bonds, has beaten the S&P of late, and had only one bad year recently, a 6.9% decline in 2002.
And it is … Vanguard Wellington (VWELX).
I’ve had money in this fund myself (though no longer do — I moved that particular pot of money to Dodge and Cox, another excellent low cost shop), and I can’t come up with a single bad thing to say about it. If you want a growth/income fund with bond exposure and very low risk, can’t argue with Wellington.
Though I’m not inclined to agree that having a big slug of bonds in your portfolio right now reduces the kind of risks I’m most worried about.
I’m guessing I won’t be able to poke holes in any of these three funds, since the best of Vanguard’s funds match up nicely with anyone, but let’s keep going and see.
#2— “for High Growth Now!”
That’s quite a promise, and probably a more compelling one for the many Gumshoe readers who like a little risk with their (higher) returns. What’s the fund?
This is intimated to be a “spin off” fund of Vanguard Health Care, which is a market-whalloper that also is closed (and had massive minimum investments before it closed a couple years ago).
If Vanguard’s really keeping this one secret, they’re doing a heckuva job. I’m not entirely certain what the solution to this one is.
I assume he’s not talking about the Vanguard Health Care ETF, since that just follows the MSCI index and doesn’t have Ed Owens great mangement behind it. If you’re going to talk about Vanguard Health Care being one of the great mutual funds, it’s not just because it’s focused on health care — the greatness of the fund must be attributable to Edward P. Owens and his team of analysts at Wellington (yes, the same Wellington Management that subadvises the Vanguard Wellington Fund, and many other funds for Vanguard and others).
So … if it’s not the Vanguard ETF than it’s not reasonable to say it’s a Vanguard fund at all — as far as I can tell, Vanguard doesn’t have any other funds that have appreciable investments in health care far beyond the size of the sector. Certainly not any other actual sector funds. I’ve seen this adviser recommending an Icon Healthcare fund in the past, but that would be a stretch since that’s a quant fund that don’t really use fundamental management (and thus, couldn’t really be compared fairly to — or favorably with, in my opinion — Vanguard’s fund).
But maybe it’s another Ed Jones fund — or one that has one of his lieutenants as the manager. That’s probably possible — if you’re Canadian, you can get his expertise through the Talvest fund, also managed by Owens (info here) and soon to be rebranded with the Renaissance name, but I’m sure that’s not what’s being teased in this ad (and it’s waaaaay more expensive than the Vanguard one, if memory serves).
If it’s some other health care fund that happens to be managed by Wellington … then I give up. I don’t know of any, they subadvise to hundreds of fund families, and it’s too much of a pain to search. I’m pretty sure Owens himself doesn’t manage any other health-focused funds that are available to US investors, and anything less than that seems like cheating. If anyone else has the solution to this, share away!
#1 — “the Best Fund for Retirement”
“If you could buy just one Vanguard fund —- or indeed, one fund in any family -— get this one.”
Well, I think few folks end up having less than one mutual fund in their portfolio — so we really oughtta figure this one out if we believe our friendly adviser at all.
He says that the manager of this fund has “extraordinary discipline”, resisted the urge to invest in technology in the late-90s, and “could be Warren Buffett’s long-lost brother.”
The fund has had an annual return averaging 17.1% over the last three years, and was up 19.1% in 2006.
In our adviser’s words, “As you can tell, I admire this manager hugely. I’ve studied him all through the 1990s, and he never strayed from very clear principles. I put a great deal of my own money… my family’s money… and the money of my wealthiest clients into this manager’s fund.
I’m assuming he’s talking about Jim Barrow here, a longtime adviser for Vanguard funds including Windsor II (which I have some money in) — but it’s not Windsor II, which unfortunately hasn’t performed quite that well lately. This fund has to be …
Vanguard Selected Value (VASVX)
This does look like a pretty stubborn deep-value fund, and something along those lines probabl should have a place in many portfolios. I don’t know that this is much better or worse than higher profile value funds (my mutual fund holdings that could be called “value” are with Third Avenue and Dodge and Cox, aside from Windsor II), but it’s definitely cheaper than almost all of them. They’re pretty heavily weighted in financials, utilities, and business services, for what that’s worth.
It also has gotten the “stay away” treatment from Vanguard, with a lift in the minimum investment to $25,000. That’s the last step before they close the fund, usually, so if you love this one I suppose now’s the time.
So … the Gumshoe takes a little walk in Mutual Fund world. I gotta tell you, it’s much more boring, many fewer snakes and worms under the rocks. And compared to the hyperbole of the stock teasers, this one made me feel a little drowsy.
Let us know if you’ve got strong feelings about any of these — or you have a better idea than I of what they’re talking about with that odd Vanguard Health Care Spin-off tease.
And have a lovely day.
Personal Capital is an advertiser with Stock Gumshoe, but Travis also uses it every day for his personal accounts and finds it invaluable. Here's what he said: "They offer a great (and genuinely FREE) 'second opinion' for your financial plan, but what I love most is their automated financial dashboard -- it will look at all your assets and debts, tally up your asset allocation, project where you'll be at retirement, and suggest ways to manage risk or improve returns. It's free, I think their free tools are great, and I think it's worth checking out -- you can do so here.