Yesterday, money manager and author Steven T. Goldberg shared his tips on picking mutual funds. Today, Goldberg highlights a handful of funds he'd trust with his own long-term money. Here are six picks, with descriptions in his words:
Selected American Shares. Chris Davis and Ken Feinberg have beaten their benchmark by an average of more than 2 percent a year for a pretty long time now. By far, the Davis family makes up the biggest shareholders of the fund. That tells you a lot. During the financial meltdown, I was worried because they had such a huge percentage of assets in financial stocks, but Davis turned out to be right in saying that there's a tremendous amount of diversity and that the companies he owns will be OK. They charge 0.57 percent annually for the fund's D shares, which you can buy directly.
Dodge & Cox Stock. It's great that this fund reopened to new investors. It may not do really well right now because it's a value fund, but this is one you have to stick with. These people have five funds, and they started the first in 1931. Dodge & Cox epitomizes what you're looking for in a mutual fund: low fees and a relatively small group of people who do one thing well. All of their funds are aimed at finding large, undervalued companies. Most people work there their whole careers.
Longleaf Partners. Here's another recently reopened value fund that's not doing well right now. The managers in Memphis have been at it for decades. Employees are the biggest owners, and they charge relatively reasonable rates: 0.90 percent per year. It's everything you want; the fund has an easily explained philosophy.
Fairholme. This is a new interest. At the end of the day, you really have to look at the record. This one's been around only since the beginning of 2000, but its record is extraordinary. The managers seem very bright, are not afraid to hold cash, and have a concentrated portfolio. [You can see a U.S. News Q&A with manager Bruce Berkowitz here.]
American Fundamental Investors. This fund is run by the first trillion-dollar fund company [Capital Research and Management]. They've taken remarkable measures to try to deal with their asset growth. You can't call this fund unrecognized, at $51 billion in assets. Every fund there does different flavors of the growth-at-a-reasonable-price strategy. The expense ratios are very low, once you get past the load [sales charge]. This is a large-blend fund with a flexible mandate and a terrific record.
Vanguard Primecap Core. This is the younger brother of Vanguard Primecap [which is closed to new investors], and the managers essentially use the same method—each managing a slice of the pie. A couple of these managers came from the American funds, and they have a phenomenal record. The fund has a 0.55 percent expense ratio.