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Fund Insights

- Alan Lavine and Gail Liberman

Here are some hot tips to help you invest.

If you'd like to put some fresh cash into stock funds, consider a small mutual fund--one that has just a few hundred million dollars in assets. Avoid funds with at least $1 billion in assets under management. Reason: Financial research by Richard Green, finance professor at Carnegie Mellon University, Pittsburgh, found that small funds with skilled managers have the ability to outperform the market. But when the mutual fund gets too large, the fund's performance lags.

"As long as the performance of the small fund that's gotten larger remains better than similar funds, it makes sense to invest," he says. "But when the performance significantly declines, other investments may be more profitable."

It could be worth following the foray of Warren Buffet, one of the world's best investors and richest people, into the mutual fund business. Buffet's recent move to purchase the Safeco group of mutual funds could make the fund group one to watch, reports Fundalarm.com. Buffet is known for investing in undervalued stocks that beat the market.

"As a part-time critic of the mutual fund industry, Warren Buffet has been both outspoken and right on target," says Fundalarm.com. "Now Buffet will get a chance to put his mouth where his money is. A holding company owned by Berkshire Hathaway, Buffet's company, has agreed to by various assets of Safeco Corporation, including the company that manages the Safeco mutual funds."

When the deal closes this fall, Buffet plans to start implementing some of his own mutual fund advice, but Fundalarm.com questions how far the fund group ultimately will go with it.

First, Buffet will sit down with the directors of the Safeco funds, and encourage them to put all Safeco fund management contracts up for competitive bidding. "Thereafter, Buffet will announce a voluntary reduction in the management fees charged to all Safeco mutual funds," the website said. "And he will ask all the trustees to abolish 12-b1 fees."

New investment worth a look: The Vanguard Group's recently introduced immediate annuity that pays you income for life. Unlike other immediate annuities, Vanguard will increase your income to keep pace with inflation. So the purchasing power of your retirement income should keep pace with the cost of goods and services.


Alan Lavine and Gail Liberman are husband and wife columnist and authors of The Complete Idiot's Guide To Making Money With Mutual Funds, (Alpha Books). Al and Gail's new book is Rags to Retirement, (Alpha Books).

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