PROS ADDING MORE TO STOCKS
- Alan Lavine and Gail Liberman
What are the pros doing now? Most investors are running to bonds for safety. But Van Harissis, manager of the Sentinel Balance Funds, is doing the opposite.
The fund, which owns both stocks and bonds, has 63 percent in stocks, 34 percent in bonds and 3 percent in cash. That is a nice long-term investment mix of securities. Historically, that kind of mix has grown at about 8 percent annually over the past seven decades. You won't hit a home run when you own stocks, bonds and cash, but your investment is less risky than a 100 percent stake in stocks.
Morningstar gives the fund a three-star rating. It says the fund is a consistently low-risk investment because it owns undervalued stocks and bonds.
Fund manager Harissis believes that the bond market fervor, thanks in part to low interest rates, will be bottoming out in the near future. Then stocks will rebound.
"You don't want to chase the market, you want to try and be ahead of the curve," Harissis says. "We lowered our position in bonds and increased our position in stocks. The fund did not have the high flying performance numbers back when the stock market was doing phenomenally. But now the positioning is working to our advantage."
The Sentinel Balanced Fund can invest as much as 75 percent in stocks. When the manager thinks the outlook for stocks is brighter, he will buy more. But he has got to see a strong up trend in stock prices.
Over the past 10 years, the fund has grown at an 8.5 percent annual rate. Last year, it was down just about -3 percent. This year, it's up 2.2 percent. The fund yields 2.6 percent.
The fund sticks with undervalued large company stocks like ExxonMobil, Anheuser-Busch, Verizon Communications, Duke Energy, Eli Lilly and Raytheon.
On the bond side, its largest bond holdings include the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, Government National Mortgage Association, Manufacturers and Traders Co., John Deer and IBM. The average credit rating of the bonds in the portfolio is AA by Standard & Poors. Two-thirds of the bonds are invested in government securities that mature in about eight years.
Alan Lavine and Gail Liberman are husband and wife columnist and authors of The Complete Idiot's Guide To Making Money With Mutual Funds, (Alpha Books).
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