Look at any mutual fund with a long-term track record so good that it has almost become a household name, and you'll come to one undeniable...
Look at any mutual fund with a long-term track record so good that it has almost become a household name, and you’ll come to one undeniable conclusion:
It sure would have been great to have owned the fund from the very beginning.
But the fund industry’s flagships and name brands — such as Fidelity’s Magellan and Contrafund, Vanguard’s Windsor and Wellington, American Funds’ Growth Fund of America or the Janus fund — weren’t on anyone’s radar screen when they were newborn.
And they were already legends by the time most investors recognized their greatness.
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While money managers crank out dozens of new funds every month, most are cookie-cutter forgettable, with no outward signs of potential greatness.
So when word got out recently that San Francisco-based money managers Dodge & Cox were opening a new global stock fund, it created a buzz.
Dodge & Cox may well be the best fund firm in history. Unlike the industry giants that pop out a new fund every time the market burps, Dodge & Cox built its reputation with just four funds.
All four are in the top 30 percent of their peer group over the last five years, and the three funds with records of more than a decade (Dodge & Cox International was the last new issue, created in 2001) are all in the top 10 percent of their Morningstar peer group over the past decade.
“Lots of fund companies make funds to sell, coming up with what they think the market wants,” says Dan Culloton, who follows Dodge & Cox for Morningstar.
“Dodge & Cox sells what they make. They do things one way — their way — and they let you come along for the ride.”
Dodge & Cox Global Stock fund will follow the firm’s value- and team-oriented strategy to pick stocks from around the world. It will invest in mid- to large-sized companies from at least three countries and will keep at least 40 percent of its assets in non-U.S. stocks.
New funds typically get a pop from being small and nimble without much attention from anyone. That’s not going to happen here, as financial advisers had been asking Dodge & Cox to go global for years, so there will be a flood of money at the outset.
“You miss out on the ground-floor effect,” says Stephen Savage, editor of the No-Load Fund Analyst newsletter, “but you’re still buying the kind of fund you could probably be comfortable holding for a lifetime.”
As such, investors should consider whether the new fund — or the reopened Stock or Balanced funds — might be worth buying. That decision starts with a portfolio review, determining if you need a global fund (or one of the reopened funds).
Then, it requires having the confidence to invest with a firm such as Dodge & Cox and be patient; the firm’s value style may be out of step with the market for a while, so the new fund could be opening into a trough.
Finally, determine if the fund can replace something you own now.
Chuck Jaffe is senior columnist at MarketWatch. He can be reached at email@example.com or Box 70, Cohasset, MA 02025-0070.