Mutual Fund Outlook
Wednesday, March 01, 2006KANGAS: March is supposed to come in like a lion, so every year at this time we take a look at two lions of the mutual fund industry, Fidelity and Vanguard. And here to help us do so are two men who follow these fund families but are not employed by them. Dan Weiner, editor of the independent advisor for Vanguard Investors and Jim Lowell, editor of Fidelity Investor. Jim and Dan, welcome back to NIGHTLY BUSINESS REPORT. The last time you fellows were here, Vanguard and Fidelity were in the midst of a war over index fund fees. Jim, is that war still under way?
JAMES LOWELL, EDITOR, FIDELITY INVESTOR: It is still underway, but Fidelity is clearly winning. They have what they call their magnificent seven, seven basis points for their seven index funds. That`s less than half the cost of what it would be over at a Vanguard index retail fund.
KANGAS: Dan, Vanguard is trying to one up Fidelity by beefing up its line of exchange traded funds or ETFs. What is it about ETFs that makes Vanguard see them as the wave of the future rather than its traditional index funds?
DANIEL WIENER, EDITOR, THE INDEPENDENT ADVISER FOR VANGUARD INVESTORS: The Vanguard vipers, which is the name of their ETFs are a brand extension of their indexing and they`re able to go through a whole new channel now, selling them through brokers.
KANGAS: Jim, a few months ago, we saw a major change at Fidelity`s flagship Magellan fund with manager Bob Stanski (ph) stepping down after a string of embarrassing underperformances. And I understand that`s led you to change your rating on Magellan from a "sell" to a "buy." I take it you like Magellan`s new manager?
LOWELL: Absolutely so. Harry Lang has an equivalently long track record relative to Bob Stanski against the same benchmark on a fund called Fidelity Capital Appreciation and he touts (ph) Stanski and his benchmark over (INAUDIBLE). He`s the right man for Magellan. He`s going to do two things, return to growth fund trajectory and also make it a globally oriented growth fund.
KANGAS: Well, Dan, we know that you`ve long favored Vanguard`s managed funds over its index funds. Why is that and what are your picks among Vanguard funds right now?
WIENER: Well, you know, the Vanguard advantage is low cost, but that low cost that goes into indexing also goes to all its managed funds and they have been able to find some excellent managers. So some of the funds that are currently open that I`m recommending are funds like Prime Cap Corps, Selected Value, these are growth and value funds and Global Equity is a global fund. It`s the only one at Vanguard which is kind of value- oriented and midcap oriented. And then finally their emerging markets, Viper, which is similar to their index fund, but you can buy and sell it on a brokerage.
Jim
Lowell's Fidelity Fund Picks |
|
| Strategic Dividend & Income | FSDIX |
| Value | FDVLX |
| Intl. Small Cap Opportunity | FSCOX |
| Nasdaq Tracker ETF | ONEQ |
KANGAS: OK. There they are nicely up on graphics and we can see their symbols. Now, Jim, what are your recommended Fidelity funds?
LOWELL: My four funds or really three funds and one EF are Strategic Dividend and Income. It`s a wonderful diversifier for virtually any growth or growth and income investor. Large cap value is 50 percent of its portfolio. The rest is convertibles, preferreds and REITs, decent yield, good market trajectory in the large cap space. I like Fidelity Value, pure madcap value play, international small cap opportunities, a new fund managed by a guy named Andy Sustine (ph), know the business by the back of his hand. He`s looking at the established international markets but in the inefficient small cap market space. I like that area very much. I also think Fidelity`s one ETF, the ONEQ (ph), NASDAQ tracker, is a great complement to the QQQ for growth investors.
Dan
Wiener's Vanguard Fund Picks |
|
| PRIMECAP Core | VPCCX |
| Global Equity | VHGEX |
| Selected Value | VASVX |
| Emerging Market ETF | VWO |
KANGAS: Just a few comments about the new Vanguard 500 index, Dan?
WIENER: Well, the 500 index isn`t new. It`s always been Vanguard`s flagship fund. But what you`re seeing now is a lot of investors are taking their money out of that fund and they`re moving that index money into their total stock market fund. And they`re going to get hammered when small caps begin to lose some of their luster.
KANGAS: Something to watch out for. OK, Jim and Dan, thanks again for joining us for this annual visit. We always enjoy it. My guests Dan Wiener of the independent advisor for Vanguard investors and Jim Lowell of Fidelity Investor.
