Big swingers also strike out quite often
Baseball fans know big swingers. They are those flamboyant home run hitters who occasionally launch 480 foot bombs into the upper decks. However, baseball fans also recognize that quite often, those same players have a high propensity to strikeout. To fans of the New York Mets Dave Kingman comes to mind while Yankee fans might recall Chris Carter. That said, unlike baseball teams, most investors can’t afford to frequently swing and miss. We wholeheartedly believe that investors should hit for average as opposed to power.
The following represents a couple of investment ideas that will most likely not rank in the top decile of performance nor near the bottom. One of our favorite funds is the Parnassus Core Equity Fund (PRBLX) whose stated objective is capital appreciate along with current income and invests “with low turnover and high conviction in approximately forty holdings.” The fund dropped 22.95% during 2008, far better than the decline of 38.49% experienced by investors in the S&P 500. As important, over the past decade the Parnassus Core Equity Fund has risen by an average of 9.18% per year far better than the 7.31% per year growth in the S&P 500.
Another of our go-to investments is an Exchange Traded Fund (ETF), the Spdr S&P Dividend ETF (SDY), a fund that screens for companies that have consistently increased their dividends for at least twenty consecutive years. Fund managers believe that “stocks included in the index have both capital growth and dividend income characteristics, as opposed to stocks that are pure yield” to which we add would most likely outperform these high yielders during a rising interest rate environment. On a price weighted basis, the fund dropped 22.88% during 2008, far better than the decline of 38.49% experienced by investors in the S&P 500.
As important, over the past decade the Spdr S&P Dividend ETF has risen by an average of 7.83% per year edging out the 7.31% per year growth in the S&P 500.
One final mutual fund that we find reliable is the Income Fund of America (IFAFX) whose primary objective is current income with a secondary one of growth. The fund has averaged 5.15% per year over the past decade and an indicator of stability, the fund sports a dividend yield of 2.87%.
Everyone wants the next Amazon or Facebook but what they NEED for the bulk of their portfolio are investments like Parnassus Core Equity, Spdr S&P Dividend ETF or the Income Fund of America. Consistent performers like these allow you to sleep at night but more importantly enable you to remain invested during rocky years like 2008. Please note that all data is for general information purposes only and not meant as specific recommendations. The opinions of the authors are not a recommendation to buy or sell the stock, bond market or any security contained therein. Securities contain risks and fluctuations in principal will occur. Please research any investment thoroughly prior to committing money or consult with your financial adviser. Please note that Fagan Associates, Inc. or related persons buy or sell for itself securities that it also recommends to clients. Consult with your financial adviser prior to making any changes to your portfolio. To contact Fagan Associates, Please call 518-279-1044.