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Funds to Buy and Sell in These Tricky Times

October 23, 2008 – by Richard Band

So, which money managers do you keep? You don’t want to get rid of a mutual fund if the manager is about to come roaring back to glory. On the other hand, if this year’s performance reflects a fundamental problem that may linger for years, it’s not too late to bail—even now.

In a moment, we’ll talk about how you can distinguish between a star batter in a slump and a worn-out jersey who should retire gracefully. First, though, a piece of good news.

Some fund managers have come surprisingly well through this trial by fire. Yes, they’re still down for the year. But they’ve proved much more nimble than their peers at sidestepping Wall Street’s pitfalls in 2008. (See also: "Mutual Funds Do’s & Don’ts.")

These are the players with the best chance to rise to the top of the charts in the next bull market. Place your money with them.

A Top Mutual Fund That Makes the Grade

Here’s a mutual fund that I’m confident will serve you well in the months and years ahead:

Oakmark Equity & Income (OAKBX, 800/625-6275; $1,000 ). (See also: "The Path to Profitable Investing.")

Stocks got you scared stiff?

Clyde McGregor, another old hand (1995), knows just the right tonic for frayed nerves: a carefully calibrated mix of stocks and bonds. After trumping his fellow "blend fund" managers for seven of the past eight years, McGregor is turning in what may be his most brilliant performance ever in 2008. Granted, OAKBX was off 4.9% as of September 30.

But that’s a spectacular 1,045 basis points ahead of the competition. This guy wins my vote as portfolio manager of the decade. May he live to be 120—and never retire! Fee-free through all leading discount brokers.

In the November issue of Profitable Investing, I name three more mutual funds that I’m urging my subscribers to invest in over the next three to four months. (I’m up 512% in one of them.) Just like OAKBX, all three impose no sales charge if you buy directly from the fund. Get their names immediately online when you join Profitable Investing risk-free today. To learn more about this special offer, click here now.

Mismanaged Funds to Sell

Some funds, sad to say, aren’t worth keeping. It’s not simply a matter of poor performance or high expenses. You should also sell a fund if…

…the manager is taking reckless risks: concentrating a huge percentage of the fund in one industry, or "doubling down" on stocks that have collapsed in price since the fund first bought them.

I’m wary, too, of managers who refuse to acknowledge their mistakes. If a fund manager insists that his or her analysis of a company that hurtled into bankruptcy was "fundamentally on target," I have to question whether that person is capable of basic critical thinking. Self-delusion can be fatal in this business. (Be sure to check out: "Winning With Mutual Funds.")

I recommend selling the following poorly managed funds during November. Performance is a problem for all of them, and some are guilty of other deficiencies I mentioned:

  • AIM Constellation
  • Fidelity Aggressive Growth
  • Hotchkis & Wiley Core Value
  • Janus Worldwide
  • John Hancock Classic Value
  • Legg Mason Value Trust
  • Pioneer Value
  • Putnam Voyager
  • RiverSource Large Cap Equity

With these deadweight funds off your books, you can switch to the stronger candidates I gave you earlier—and start your portfolio on the road to recovery now.

Get the names of Richard’s three other top mutual funds immediately when you join Profitable Investing today. Richard E. Band is the newsletter world’s #1 authority on investing for low-risk growth. His flagship Total Return Portfolio has more than quadrupled in value since its inception in 1990, and that’s while taking far less risk than the popular stock market index funds! Click here now to get started and take advantage of this special offer!