The 10 Best Mutual Funds for Your Tax-Stimulus Payment
Funds with investment minimums below $1,200.
Funds with investment minimums below $1,200.
Yes, there are more answers than Vanguard STAR (VGSTX). Any search for low minimum funds has to have the cheap, superdiversified, low minimum option from Vanguard. But since you probably know about that one, I'm going to share 10 more with you.
Americans outside of the highest tax brackets are getting checks for $600-$1,200 in their mailboxes and bank accounts thanks to Uncle Sam. (Click here to check eligibility with the IRS.) So, I'm here to help you figure out what to do with them.
It seems funny to me that the economic mess was caused by individuals, companies, and hedge funds taking on way too much debt, so our solution is for the government to go into more debt and cut everyone a check. I'm very much in the same camp as my colleague Christine Benz who last week advised readers to pay off debt with the money.
However, if you're in good shape on that front, I'd suggest investing it in a mutual fund and watching it grow. Even a modest investment can grow into something meaningful over time. What's more, if it's your first or second fund, it provides a great place for you to send more money over time so that, before you know it, you're talking about some serious money. One of the most important factors in how comfortably you retire is how soon you start saving.
So, let's get right to it. I'll share five good no-load and five good advisor-sold funds all with minimum investments of $1,000 or less. I chose all 10 from the FundInvestor 500.
No-Load
Harbor Bond (HABDX)(Minimum $1,000)
If there's something you want to buy in the next few years, a bond fund is a good place to build up your stash. The good ones are pretty dependable and offer a decent return. Harbor Bond just happens to be one of the best. It has low expenses and is run by Bill Gross and the rest of PIMCO--one of the best bond shops around. The fund sticks with high-quality debt but frequently beats its peers and its index by making clever macroeconomic bets.
Julius Baer International Equity II (JETAX)(Minimum $1,000)
This one is also run by former Morningstar Managers of the Year, and it also makes top-down bets with uncanny accuracy. However, this one invests in foreign equities. The record here is fairly brief, but managers Rudolph-Riad Younes and Richard Pell have built a great long-term record at Julius Baer International Equity I (BJBIX). The only difference is that I invests a bit in small caps and this one doesn't. Needless to say, a foreign stock fund requires more than the few years' time horizon of a bond fund.
Oakmark Select (OAKLX)(Minimum $1,000)
That's right, I'm still recommending this fund despite its brutal slump. I'm a contrarian, and I believe that you stick with good managers with strong track records as long as they're still sticking to their strategy. In fact, after a slump is often the best time to buy. As a shareholder, I'm optimistic that there's a rebound on the way.
Pax World Balanced (PAXWX)(Minimum $250)
This fund is an easy one to hold on to because it adds a 25% fixed-income stake to a 75% stake in equities. Over time that's helped to smooth out the bumps a bit. Manager Chris Brown has built a strong record at this socially screened fund. He follows a blue-chip growth strategy that has lots of U.S. multinationals that sell a lot overseas such as Deere & Company (DE) and Procter & Gamble (PG).
Transamerica Premier Equity (Minimum $1,000)
This large-growth fund is the most aggressive of my 10 low-minimum picks, but it's worthwhile if you have a long time horizon. Manager Gary Rolle looks for companies with strong growth prospects and a competitive advantage. He builds a concentrated low-turnover portfolio of the best names he turns up. The fund boasts top-quartile performance over the trailing three-, five-, and 10-year periods.
Advisor-Sold
I should note that while load funds have low minimums, you're probably not going to get a red-carpet reception if the grand sum you are investing with an advisor is $1,000. Many are only interested in those with $1 million or more to invest, but if you already have an account with an advisor or have access through one of the exceptions in which people have modest amounts invested in load funds, this list will help.
American Funds New Perspective (ANWPX)($250 Minimum)
This fund covers the globe with an army of analysts and managers to find great stocks. The current mix is 55% foreign, the rest United States. A number of broker-sold world-stock and foreign funds charge too much, so this fund's 0.74% expense ratio adds a lot to the appeal.
American Funds Washington Mutual (AWSHX)($250 Minimum)
I love funds with low minimums and a focus on dividends because it means a healthy slug of those dividends make it back to the investor. This is one of the oldest and most trustworthy funds with such a focus.
BlackRock Global Allocation (MDLOX)($1,000 Minimum)
This fund will get you diversified really quickly. It owns 543 stocks and 73 bonds spread out across the globe. The fund has an excellent long-term record, and it all came under manager Dennis Stattman, who has been with the fund since its 1989 inception.
Franklin Federal Tax-Free Income (FKTIX)(Minimum $1,000)
If you're in a high tax bracket, this fund will save you some headaches in April. This fund puts its $7.7 billion asset base to good use, loading up on 823 bonds at last count, so that problems in a couple of issuers won't rock the boat.
Mutual Beacon (TEBIX)(Minimum $1,000)
This fund looks to earn solid long-term returns with less risk than its peers or the market. It does that by insisting on stocks trading at a steep discount to their value. That means betting on restructurings or other fixes to companies with major problems. The firm's analysts have done a great job over many years, and that gives me confidence.
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