Why We're Not Endorsing This Kid-Themed Fund
Bob Bacarella's Monetta Young Investor has some good features, including a tuition-reward program, but we're not sold on the fund or the manager.
Editor's note: See the companion story about howBob Bacarella promotes his fund.
Creating a mutual fund for young investors is a noble endeavor, but the concept seems to work better than the reality. For example, after acquiring the Stein Roe funds, Columbia merged Stein Roe Young Investor into another fund, effectively eliminating it. Two other such funds, USAA First Start Growth (symbol UFSGX) and SunAmerica Blue Chip Growth (SVLAX), have produced less-than-stellar returns.
And then there’s Monetta Young Investor Fund (MYIFX). The fund’s history is brief but promising. From its launch in December 2006 through October 20, the fund returned 3.1% annualized. Over that period, Standard & Poor’s 500-stock index lost 6.6% a year. The fund lost 27% last year, beating the S&P 500 by ten percentage points, and its 42.3% surge so far this year trounces the index by 19 points.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Although Young Investor hasn’t been around for a long time, its manager, Bob Bacarella, has been investing professionally for more than 30 years. Bacarella graced the cover of Kiplinger’s Personal Finance in March 1992. Back then, we dubbed his flagship Monetta Fund (MONTX) “a big-league performer” for having returned an annualized 20% over the previous five years.
At the time, Bacarella followed strict rules about when to sell stocks, unloading those that fell 20% or rose 30%. But not long after we praised him, his system stopped working. In October 1996, we called the Monetta Fund a “stinky fish.”
Starting in 1999, though, Bacarella seemed to have regained his touch. Over the past ten years, Monetta Fund, which holds just $46 million in assets, returned an annualized 3.0%. That may not seem like much, but it tops the S&P by 2.9 percentage points a year. Year-to-date, the fund -- named for the Latin word for money, moneta -- is up a whopping 46.8%.
Bacarella, whose voice bears a passing resemblance to that of radio DJ Casey Kasem, says he’s become a smarter investor over the years. To find winners, he watches the trading volume of a stock that’s on the rise to determine when investor interest is picking up. He also keeps a close eye on what others in his category are holding. Looking back, he says the requirement to sell after a stock gained 30% hurt his performance. So he’s joined the momentum bandwagon, holding a stock until it starts to fall behind its peer group.
Bacarella doesn’t analyze companies himself. He reads analyst reports but doesn’t pay attention to earnings estimates. Instead, he looks for words such as “beating” and “improving.” “The game is buying stocks other people want to own,” says Bacarella. “The true test is volume, which determines the extent of interest."
For now, he’s bullish on Google (GOOG), a top holding in both Monetta Fund and Young Investor. “Here’s a company you want to hold for the next five years because of its dominant position,” he says. He has a similarly upbeat view on Apple (AAPL), a top holding in Young Investor.
Young Investor is not a pure play on kid-related stocks. Although the fund holds about half of its assets in companies kids know -- for example, Walt Disney (DIS) and McDonald’s (MCD) -- the other half are in exchanged-traded funds designed to track the stocks of large U.S. companies. Bacarella says he likes ETFs because of their low cost and low turnover. Besides, he adds, most active managers are “closet indexers” anyway.
On the plus side, Young Investor lets you start for just $100 if you agree to an automatic-purchase plan and offers an age-based financial “kit” of piggy banks for tots and baseball caps for teens. Its annual expense ratio of 1.04% is well below the 1.31% for diversified U.S. stock funds. (The figure for Young Investor includes the fees of its ETF holdings.)
The fund’s most appealing feature may be its tuition-reward program. Students enrolled in the program can receive credits for up to one year’s worth of tuition at more than 235 U.S. colleges and universities, most of them small (you can see the list of participating schools at www.tuitionrewards.com/index.cfm?meat=schools). Four of the schools -- Beloit College, Creighton University, Clark University and Hillsdale College -- are on Kiplinger’s Personal Finance’s list of the 100 best values in private colleges and universities.
The tuition deal aside, we’re not completely sold on Bacarella or Young Investor. Bacarella essentially practices technical analysis, which judges securities on the basis of price and volume trends. We’d prefer to invest with a manager who thoroughly vets companies. That, plus Bacarella’s extracurricular activities promoting his fund on the Internet (see below), gives us pause.
See How Bob Bacarella Promotes His Fund.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
I'm 57 with $4.1 million and looking to retire abroad in a few years. I no longer see the point in contributing to my 401(k). Am I wrong?
We ask financial experts for advice.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on Retirement
While some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.
-
S&P 500 Slips Ahead of Fed Week: Stock Market Today
All eyes are on the Federal Reserve ahead of next week's critical policy meeting.
-
Dow Gains 617 Points as Rate Cuts Near: Stock Market Today
Wednesday's economic data didn't shift Wall Street's expectations that the Fed is preparing for a rate cut at next week's meeting.
-
S&P 500 Hits New High After Oracle Earnings: Stock Market Today
Another down day for Apple held the Dow Jones Industrial Average back, though.
-
Stocks Grind Up to New All-Time Highs: Stock Market Today
UnitedHealth stock led the Dow Jones Industrial Average amid increasing signs the labor market has not been well for months.
-
Markets Prepare for August Inflation Data: Stock Market Today
Apple CEO Tim Cook is still important, but price action this week is as much about incoming inflation data ahead of next week's Fed meeting.
-
Stocks Slip as Job Growth Stalls: Stock Market Today
The August jobs report came in much weaker than expected, while the unemployment rate ticked higher.
-
S&P 500 Hits New High on Jobs Friday Eve: Stock Market Today
The S&P 500 hit a new all-time closing high and most of the stocks in the Dow Jones Industrial Average were up the day before a critical jobs report.
-
Big Tech Names Rise Above Broad Weakness: Stock Market Today
Some familiar names enjoyed solid rallies on the resolution of outstanding questions, but macro uncertainty hangs over the broader market.