New Money

Fidelity's storied Magellan fund has turned out some pretty ugly results this year. So far in 2008, it's down 54 percent, 14 percentage points behind the S&P. It's also getting walloped by 97 percent of its peers.

Despite those results, Eric Kobren, who writes the independent newsletter Fidelity Insight, says investors should stick with Magellan on account of its manger, Harry Lange (he currently rates the fund "OK to Buy.")

Back in the 70's and 80's, Magellan rose to fame under the direction of legendary investor Peter Lynch, who achieved astounding annualized returns of 29 percent using a buy-what-you-know strategy. Lynch's immediate successors continued to outrun the market, but the fund's next manager, Robert Stansky, failed to keep the ball rolling.

Under Stansky's management, Fidelity had come to be known in investing circles as a "closet index fund" for mimicking the S&P 500.

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At Legg Mason's annual media luncheon Wednesday, star fund manager Bill Miller said "the bottom has been made" in U.S. stocks.

It's worth noting that he doesn't have the best record for calling market bottoms.

Miller also said the Fed should buy stocks and junk bonds to head off a deeper financial crisis, and that taxpayers could make a killing on the market rebound.

As for his performance this year, Miller told Reuters his fund returns were "far worse" than he predicted, and that the year has been "terrible, a disaster and awful." That's fair. So far this year, his Legg Mason Value Trust--best known for beating the S&P 15 years in a row--is down nearly 60 percent and is lagging behind 99 percent of its peers.

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Quality is important in a market like this. That's a no-brainer. But the folks at Jensen Portfolio take this quality business to an extreme. Managers of the $1.8 billion fund (symbol JENSX) invest only in companies with a 10-year history of achieving at least 15 percent return on equity (ROE is a measure of a company's profitability). The ability to clear that hurdle typically means a company has plenty of cash on hand, which it often returns to shareholders in the form of a dividend. Recently, comanager Robert Zagunis talked to U.S. News about why dividends matter in this market:

You invest in a lot of stocks that pay dividends. What's the advantage?
An interesting aspect of the market today is—as someone has already said—there is no place to hide. If you want to stay in cash, you can put it in a 90-day T-bill and get nothing. Longer-term bonds give you a lot more, but people aren't doing that because of risk concerns. Compare a muni-bond yield or a corporate-bond yield to the dividend yield on very good companies. Push into the mix that a lot of companies we track have free cash flow that allows them to very easily increase dividends each year. You're almost better off buying the dividend stream than anything else out there. If you're truly a long-term investor, a lot of these dividends actually go up year over year. Essentially, you have a longer-term equivalent to fixed income and possible appreciation. 

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Even with its 22 percent loss in the past four months, Harvard is still insanely rich.

To get an idea of the historical growth and enormous scale of its endowment, take a look at this chart (via Portfolio.com's Market Movers).

The $8 billion drop puts it at $28.8 billion--roughly where it was in 2006, reports Market Movers.

No reason to panic.

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