Need Ideas for Your Bonus or IRA Investment? I've Got 6.

Need ideas for your IRA or money you just received in a bonus? I’ve got six of them. Four work for both and two just for that bonus. Let's begin with the two.

Say you just got a nice bonus, but you plan to spend most of it in fairly short order. Maybe on something fun like taxes or your kid's college tuition. If you are going to spend that money in the next year, then you must accept dullness. That's right, the not-even-keeping-up-with-inflation dullness of a money market or CD. The point is you aren't holding on for long and you don't want any losses, so just accept it.

On the other hand, what if you are looking out a little further, say three years or so when you plan to buy a house, send a kid to college, and so on? I'd venture into something short term (but longer term than cash).  Vanguard Short-Term Bond Index (VBIRX) is a nice straightforward fund without much risk at all, given its portfolio full of high-quality short-term debt. Its worst quarter in recent years was a 1.07% loss in 2008, but it hasn't had a calendar year in the red. Another low-risk option would be a target-maturity fund like Fidelity Municipal Income 2015 . The plan there is to wind down the fund around the maturity date. So, by letting the portfolio's maturity shrink as 2015 approaches, portfolio managers are reducing (but not eliminating) the risk levels as you get ready to spend your money.

Four for the Core 
Now, let's move on to four core funds that are great long-term investments that fit nicely in IRAs or plain old taxable accounts. These are outstanding funds you can own for a long time. In addition, the managers of each one have at least $1 million of their own money invested in their funds.

I'll begin with a couple of asset-allocation funds. If you are worried about timing your new investments correctly, these funds are great options as they are making that allocation for you. One pick has a more narrow purview, while the other has a very wide latitude.

 FPA Crescent (FPACX) is a great fund run by "free-range chicken" Steve Romick. Romick has a lot of flexibility, though you shouldn't view this as one of those "one and done" funds that gives you a little of everything. Rather, Romick uses his flexibility to invest where he believes there's a strong risk/reward profile or to simply sit on cash when the opportunities are too limited. Over nearly 20 years at the fund, he's consistently curtailed losses in down markets while producing solid returns in rallies. FPA said the fund entered 2012 with 19% in cash, 65% in equities (one third of which are foreign), and a 2% short position in equities.

 PIMCO All Asset All Authority makes use of PIMCO's wide range of funds to allocate among a slew of asset classes. Rob Arnott seeks to find undervalued asset classes while steering clear of those in danger. While his is a very different fund from FPA Crescent, it too places a premium on defense. (The institutional (PAUIX) shares can be accessed for $100,000 in some fund supermarkets.)

 Dreyfus Appreciation (DGAGX) is a wonderfully consistent patient investor in high-quality stocks. Subadvisor Fayez Sarofim runs a very low turnover strategy that emphasizes finding companies with brand power at a reasonable price. So,  Philip Morris International (PM) (though it also owns  Altria (MO)),  Apple (AAPL),  Coca-Cola (KO), and  Procter & Gamble (PG) dominate the portfolio. In addition, as is required of Houston-based investors, the fund has a large slug of big energy names such as  Exxon Mobil (XOM) and  Chevron (CVX).

 Dodge & Cox International (DODFX) is another standout that I'd happily own for decades. You have low costs, stable management, and a sound strategy. Year to year, its value style isn't really thrilling, yet its 10-year return of 9.5% annualized bests 98% of its peers'. The fund had an off year in 2011, but Dodge has a history of rebounding strongly from weak calendar-year performances.

 

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