(PUB) Investing 2015

The Funds in Morningstar’s 401(k) Continued From Cover

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The 11 analysts have an average tenure of 11 years. This is a growth fund that tends to do well in market rallies. With names like Apple AAPL , Facebook FB , and Biogen BIIB in the top 10 , the fund is certainly comfortable with some valuation risk, but long-term results suggest those risks are acceptable. Loomis Sayles Bond LSBDX Dan Fuss isn’t shy about taking on credit or currency risk, but he is quite savvy about finding good values before doing so. It’s a wide-ranging fund that goes into high-yield and foreign-currency debt whenever it sees attractive bonds. As with Harbor, this is also a fund where a transition may be near. Fuss is also past the standard retirement age, but comanagers Matthew Egan and Elaine Stokes are skilled investors who give us confidence that this fund will be worth owning even after Fuss retires. The fund has the support of a 40 -member credit team as well as other groups at the firm. The Retail share class has the ticker LSBRX . Ted Bigman has run this fund since it was launched 20 years ago. He runs a somewhat cautious strategy that holds up well in downturns while still outper- forming its peer group. Unfortunately, this fund is difficult for individual investors to gain access to outside of a 401 (k). Oakmark Select OAKLX This fund is coming up on its 19 th anniversary, and it has been in Morningstar’s 401 (k) for about 15 of those years. Bill Nygren is a big believer in the importance of good management, though he also wants to buy in at a modest price. He’s done a remarkable job over 18 years. He said that he has shifted his views on closing the fund a bit so that he now thinks it’s better to keep a fund open and attract modest inflows than to close a fund. However, he acknowledges that a focused fund like this one does have some capacity limits. Oppenheimer Developing Markets Y ODVYX For those who prefer a pure emerging-markets play, our plan has Justin Leverenz’s closed fund. Leverenz focuses on stock selection and pays little heed to Morgan Stanley Institutional US Real Estate MSUSX

American Funds Washington Mutual R5 RWMFX The fund has some strict rules to follow. It aims to beat the S & P 500 ’s dividend yield, and 90% of the companies it owns must come from the S & P 500 . All companies must meet the listing requirements of the New York Stock Exchange. It can’t invest in companies deriving the majority of their revenues from tobacco or alcohol. The end result is a solid if unexciting portfolio of dividend-paying value stocks that has produced consistently solid returns. The fund is in the top quartile for the trailing five- and 10 -year periods. The retail A shares’ ticker is AWSHX . DFA International Small Company I DFISX There aren’t a lot of foreign small/mid-cap funds that are attractive and still open to new investors. With two large-cap foreign funds, we wanted a good diver- sifier that was predominantly small cap. This fund has one of the lower market caps and one of the lower expense ratios among the Medalists, so it was a natural choice. DFA runs a passive strategy that doesn’t track an index. By doing this, it can secure better prices on stocks for shareholders. It can step in to buy when there’s an eager seller and sell when there’s an eager buyer. The fund still behaves like an index fund, only that trading flexibility helps it perform a little better. Dodge & Cox International Stock DODFX I’m glad they closed this fund to new investors as it’s topping out at $70 billion these days. The strategy is a straightforward value process that leads manage- ment to buy good companies with falling valuations. What makes this a winner, though, is the depth of man- agement and analysts. Many make a whole career of their time at Dodge, and thus their long-term interests are aligned with shareholders’. The fund also charges a very reasonable fee. The closest open equivalent is Dodge & Cox Global Stock DOFWX . Harbor Capital Appreciation HACAX Jennison Associates may not be quite Dodge & Cox, but the experience and depth at this growth fund are still impressive. Although Sig Segalas is old enough to retire should he choose to do so, he has the support of comanagers Kathleen McCarragher plus three more comanagers with an average tenure of 25 years.