Stock funds raise questions

Oakland Tribune, Mar 23, 2007

WHILE STOCK mutual funds are the most popular stock market vehicle for everyday investors, they still elicit ongoing questions, as evidenced by the queries I received following my March 2 column on our 2007 No-Load Stock Mutual Fund Honor Roll, which includes Ariel Fund, Fidelity Value Fund, Royce Pennsylvania Fund, Third Avenue Value Fund and T. Rowe Price Capital Appreciation Fund.

Q: You said that the Honor Roll funds can be bought in a brokerage at Scottrade, afrom Business 1

discount broker, some for no fee and some for a small fee. But I think Scottrade fees are now different than what you said in your column.

-- M.W., Oakland

A: Scottrade has changed its fee structure. Currently, Ariel Fund and Royce Pennsylvania Fund can be included in your Scottrade account without a fee, and to include Fidelity Value, Third Avenue Value and T. Rowe Price Capital Appreciation there's a charge of $17 online and $37 per fund if you go through a Scottrade broker. Don't be too surprised if the fee stricture changes again.

Of course, any of the five funds can be bought directly from the funds themselves without a charge because they are no-load funds. Why pay Scottrade for a no-load fund? Because many investors like to keep all their investments -- stocks, bonds and funds -- in one account and on one monthly statement. I singled out Scottrade because its commissions on individual stocks are among the lowest -- $7 online and $27 through a broker for any number of shares purchased. Scottrade is not the only firm with fund alliances. So check with your broker.

Q: Do you sell mutual funds?

-- L.W., Fremont.

How do I reach Scottrade?

--H.R., Manteca,

and B.S., Oakland

A: I'm just a financial columnist trying to educate the everyday investor. Scottrade can be reached at http://www.scottrade.com or (800) 619-7283. Also, the company has offices around the country where a broker can be dealt with face-to-face. For example, there are offices in Oakland, Fremont, Walnut Creek, San Francisco and San Mateo. Addresses and phones numbers are listed on Web sites and in phone books. Remember that as a discount broker Scottrade doesn't give advice but will explain investments and execute trades.

Q: What happened to the Muhlenkamp fund, a good performer on your Honor Roll last year?

-- L.W., Alameda,

and L.T., Castro Valley

A: Muhlenkamp had a mediocre year last year while the market was strong, so it didn't live up to the Honor Roll requirements of double-digit returns over one, three, five and 10 years. However, our system is not perfect and if you still have faith in Muhlenkamp, then hold it. There are lot of good funds that will make money for investors over the years that did not make the list. We have to be very fussy in our selections to keep the entries down to a manageable size.

Q: My 401(k) is managed by Fidelity Investments, so can I put Fidelity Value Fund, one of your Honor Roll entrants, in my plan?

-- T.B., Stockton

A: I guess I'm surprised that it's not already there. Fidelity says you will have to go through your plan administrator at work and ask him or her to consider adding Fidelity Value. The administrator should have some pull with Fidelity.

Q: Why are there no Vanguard funds in your Honor Roll? Vanguard funds are all no-loads with the lowest annual fees in the industry.

-- N.A., Hayward

A: Vanguard's good performing funds are either closed, index funds, focused on one area or impose unusually high minimums to get in. So this was not Vanguard's year. But it's a great company and money can be made there. But we had to draw some very strict lines to keep the number at five funds. We have attempted to make picking stock mutual funds as simple as possible.

Q: What about bond funds?

-- A.F., Oakland

A: No bond fund can match the return of these stock funds. Add to that the fact that bond fund values are annoyingly sensitive to interest rate movements.

Cliff Pletschet's Personal Finance column appears Friday and Sunday. Send general-interest questions to him at P.O. Box 28147, Oakland, CA 94604; or phone (510) 531-5620. Give your name, city and the question in brief form. Also, visit http://www.investment- educator.com.