2009 Best List: Investing

Stocks & Bonds

2009 Best List: Investing

Protect your portfolio, your pocketbook and your conscience.

Best funds for these times.

Inflation protection. If inflation starts to skyrocket, FIDELITY STRATEGIC REAL RETURN (symbol FSRRX) will have you covered. The fund holds a mix of inflation-indexed government bonds, commodities, real estate and floating-rate loans. Each of those will benefit from rising prices, and by diversifying, the fund should provide a relatively smooth return.

Low minimum. Last year’s winner, AMANA TRUST GROWTH (AMAGX), still has what it takes: smart management, a stellar record and a $250 minimum initial investment. The fund invests using Islamic principles, but investors of any faith will like its 6.7% annualized gain over the past ten years, which beats 98% of large-company growth funds.

Recovery winner. T. ROWE PRICE MID-CAP GROWTH (RPMGX) manager Brian Berghuis likes fast-growing companies that generate high returns on invested capital, a group that should boom through the recovery. Over the three years following the 2000-02 bear market, the fund gained 23% annualized, beating the average mid-cap growth fund’s 19%.


A sinking dollar. Currency maven Axel Merk’s MERK HARD CURRENCY (MERKX) seeks to profit from the dollar’s decline by investing in gold and money-market securities denominated in foreign currencies he likes. From its inception in 2005 through October 8, Merk’s fund gained 7.5% annualized, easily besting the 2.4% gain of the relevant index.

Ethical investing. Manager Todd Ahlsten looks for dividend yield and good karma at PARNASSUS EQUITY INCOME (PRBLX). After screening out firms that deal in tobacco, gambling, alcohol, firearms or nuclear energy, he invests in companies with competitive advantages. The fund’s ten-year, 6.8% annualized gain beats the S&P 500’s flat returns.

New fund. Fund sponsor Third Avenue seldom launches new funds, so you know THIRD AVENUE FOCUSED CREDIT (TFCVX) must be a good opportunity. The new fund will focus on junk debt, convertible bonds and distressed securities-a natural fit for Third Avenue, whose founder, Marty Whitman, is an expert on distressed securities.

ETFs: Best in class


Where to invest for just about anything

Return: 4.9% annualized since 2003.
Why we like it: Returns on this reliable, high-grade-bond fund have outpaced most regular and exchange-traded corporate-bond funds since its start-up in 2002. Plus, it pays a dividend every month.

Return: 16.1% annualized since 2004.
Why we like it: You don’t need active management to take advantage of emerging markets. Vanguard’s ETF beats the majority of emerging-markets funds and charges a minuscule 0.27% in annual expenses.

Category: Small Companies. VANGUARD SMALL CAP ETF (VB)
Return: 3.7% annualized since 2004.
Why we like it: Many ETFs have low expenses, but for small stocks, Vanguard’s Small Cap ETF takes the cake by eating up just 0.15% of assets per year. And this fund currently sports a dividend yield of 1.5%--surprisingly high for a small-cap fund.


Category: Complete Portfolio.iSHARES S&P GROWTH ALLOCATION (AOR)
Return: 15.7% so far in 2009.
Why we like it: This no-frills, all-in-one fund includes everything from stocks and bonds to TIPS and REITs. It’s moderately risky, with a mix of 60% stocks and 40% bonds, all for the incredible price of 0.33% in annual expenses.

Best Investing Websites


MORNINGSTAR.COM For analysis and statistics on your favorite stocks and mutual funds, this is your go-to site. Loaded with nifty tools to rate your funds, the site also has videos on funds, the economy and market trends. For more-detailed insight, pay $174 for a yearlong premium membership.

INVESTINGINBONDS.COM This free site shows price and early-redemption data for municipal bonds, as well as corporate, government and mortgage-backed issues. It’s a good choice for bond-market newbies. Set up by the Securities Industry and Financial Markets Association, an industry group, the site also has market commentary.


Best Financial Minds

Pundits who have a finger on the pulse of the markets.

Best Financial Analyst: MEREDITH WHITNEY, Meredith Whitney Advisory Group
Back in October of 2007, Meredith Whitney warned that Citigroup would have to raise capital, sell assets or cut its dividend. The call made her one of the early voices on Wall Street to sound the alarm about the coming financial crisis. Whitney’s record of many such prescient calls makes her far from a one-hit wonder. View some of her research free at www.meredithwhitneyllc.com.

Best Fund Manager: BRUCE BERKOWITZ, Fairholme Fund
Bruce Berkowitz ignores the crowd to find bargains among the unloved and beaten down. An admirer of value-investing legend Warren Buffett, he looks to buy great companies that are selling at prices he thinks are cheap and that have experienced managers. His Fairholme Fund (FAIRX) returned 13% annualized from its December 1999 start through October 8, while the S&P 500 lost 1.4% a year.

Best Market Strategist: LIZ ANN SONDERS, Charles Schwab
Investment strategist Liz Ann Sonders has proved herself an expert in divining which way the economic winds will blow.

In the fall of 2006, for example, she warned Schwab clients about the housing-market bubble. Recently, she cautioned that “the easiest money has been made” in the stock market’s latest rally. You can read her commentary free at www.schwab.com.

Best Investing Newsletter: Buy and hold? Fuhgeddaboudit. Janet Brown’s NOLOAD FUND*X newsletter selects mutual funds exclusively on the basis of momentum. Its record: 12.4% annualized over the past 20 years. Cost: $149 for one year.

Best IRA for Kids

A first step on the road to riches. E*TRADE'S IRA has no minimum-deposit requirement and no annual fees (www.etrade.com/nofeeIRA). If your child has earned income from a job, he or she can invest up to $5,000 in 2009.