Five Great Funds If You Don't Have a Lot of Dough
Automatic investing plans get you into good funds for very little money.
Automatic investing plans get you into good funds for very little money.
Stocks are on sale, and this is a great time to commit more money to the market. "What money?" is the response I get from some people, and understandably so. After all, money's tight. Bonuses and pay are down at companies all over the country. People are worried about their jobs, so they naturally want to build up a healthy pile of cash.
If you're a little short on money to invest, consider funds that allow a low minimum initial investment to dollar-cost averaging. Not only is it a way to build up your investments, but it also enables you to take advantage of the falling market. Two market skeptics turned bulls, Jeremy Grantham and Bob Rodriguez, have said that they are investing steadily and deliberately over an extended period of time. You can do the same with automatic monthly investments. Here are a few of my favorites with a minimum initial investment and a commitment to monthly investing of just $250 or less.
T. Rowe Price Retirement 2040 (TRRDX)
Automatic investments can work for people of most ages, but this approach is particularly attractive for people new to the workforce. Target-date funds are broadly diversified, and they even handle asset-allocation shifts that you need to make over time. To make this really work, though, you need to step up your monthly contributions over time in order to build up a good nest egg. When you start to have larger sums to invest, don't just move on to other funds or stocks and leave this as a tiny portion of your portfolio. Keep investing in this fund so that it can work as your core holding.
Artisan International (ARTIX)
Mark Yockey and team are among the best foreign-stock fund managers around. After last year's big losses in foreign stocks, interest has definitely cooled. Yet many argue that foreign stocks are just as cheap as U.S. stocks. Yockey takes a basic growth-at-a-reasonable-price approach that he applies to big markets and rather small ones. Over time he's found plenty of winners that way.
Jensen (JENSX)
I mentioned that I bought this fund last year, and I think it makes a great core holding. Management looks for high-quality stocks trading at a discount. They employ a patient, low-turnover approach that's worked nicely over time. In this tough market it's comforting to own some stocks with strong brands and the ability to generate a lot of cash.
Dreyfus Appreciation (DGAGX)
If you don't like a low-turnover mega-cap fund, how about a low-turnover mega-cap fund? This fund is subadvised by Fayez Sarofim in Houston, and it's wonderfully consistent. Maybe the biggest difference with Jensen is that it owns a fair amount of energy names. More importantly, it's worked. The fund is ahead of the S&P 500 and the large-blend category over the trailing 15 years.
T. Rowe Price Equity Income (PRFDX)
Equity dividends are taxed at half the rate of regular income, and stocks paying dividends tend to be more stable than equities as a whole. That's a good reason for owning an equity-income fund in general. The reason for owning this specific fund is for Brian Rogers, who's done a great job in 24 years at the helm of this fund. He keeps risks low, and that's a welcome thing in this market. To be sure, he faces the challenge of widespread dividend cuts from U.S. companies, but the fund would still be attractive even if its yield came down from the 3.7% trailing 12-month yield that it boasts today.
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