Mutual Funds/opinion


Warren, I have 10 mutual funds. Three of them have been stuck at Morningstar's 3 star rating for several years. Two are in an IRA, American Washington Mutual (AWSHX) and American Capitol World Growth (CWGIX). The third one is American Growth Fund of America and is not in an IRA. Even if I wanted to trade that one, it would be a taxable event which I want to avoid, so that leaves the other
two. I've had both for many years- the World Growth fund for some exposure to world stocks, and the Wash. Mutual fund seems stable. I did some research and neither are terrible funds, but still wonder if after all these years I should trade either of them for something better in the same category. If so, do you have any recommendations? I'm in no hurry. Thanks

Hi Lee--

I myself am also averse to paying taxes, so I'm inclined to keep any decent mutual funds that I've held for many years and that have blessed me with with large capital gains.

As for switching funds, my outlook is: better too many funds rather than too few. So, even if your funds inside an IRA have not shot out all the lights, I'd be inclined to buy NEW funds rather than sell any older ones. Unless, of course, any have done very poorly due to management mistakes. What to buy? There are perennial winners, like Vanguard Dividend Growth and Fidelity Contrafund and Dodge & Cox Stock.

But the first question to ask yourself is: Is your portfolio well diversified? With large caps and small caps, growth and value, foreign and domestic? And do you have good fixed-income funds? I like T. Rowe Price Spectrum Income, for example.

You might ask an outside authority to look over your portfolio, someone who would take your age and job security into consideration.

Good luck!


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Warren Boroson


Author of "Keys to Investing in Mutual Funds" (Barrons), "Ultimate Mutual Fund Guide" (Probus), "How to Pick Stocks Like Warren Buffett" (JKLasser), and "The Reverse Mortgage Advantage" (McGraw-Hill). Former financial columnist for Gannett News Service.


Author of 20 books; winner of 1996 Personal Finance award from Investment Company Institute and Washington University. Formerly on staffs of Money and Sylvia Porter's Magazine. Had a radio program (on WEVD) about mutual funds and a newsletter, FundDigest.

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