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My Top Holdings The Contrarian | Russel Kinnel

own) has recently reopened. There’s a lot of overlap between the two, as the excellent Primecap team in Pasadena, Calif., runs both funds. I’ve owned Capital Opportunity in a Roth IRA since 1998 , when Primecap took the helm. However, when I wanted to invest on the taxable side, the fund was closed, so I chose Prime- cap Core in 2005 . When the best growth investors come with one of the lowest expense ratios, it’s a no-brainer. Vanguard Tax-Managed Capital Appreciation VTCLX is another super cheap passive fund that I’ve owned for a good while. Index funds are pretty tax- efficient to begin with, but Vanguard’s tax-managed funds are a little better. They follow an index closely but have the flexibility to realize losses in order to avoid capital gains distributions. They have not yet made any capital gains distributions, so it would seem they are doing a good job. You can boost your returns significantly by lowering fees and postpon- ing taxes so that your investment can compound in the meantime; this fund is a good way to do both. I’ve owned Dodge & Cox International DODFX for more than 10 years, and I haven’t flinched, even when it had a lousy 2008 . Given that the fund’s 10 -year returns are in the top decile of the category, I’m glad I stuck with it. There’s really a lot in common between Dodge & Cox and Primecap; you have two groups where very smart people stay for their whole careers. It’s rare to see any managers or analysts leave either firm, both of which are employee-owned. You have managers who stick to their strategies through good and bad, and they give investors a good deal on fees to boot. Primecap Odyssey Aggressive Growth POAGX is in my 401 (k), so yes, it’s my third fund from Primecap. While most of the firm’s funds have a lot of overlap, this one stands out, as it is much smaller in market cap and much more volatile. Having seen how well Vanguard Capital Opportunity did in its early years, I was happy to buy this in my 401 (k). œ

I’m a big fan of managers who have skin in the game, so I thought I’d take some time to share my top hold- ings with you. Of the funds I own, all but one is a Morningstar Medalist, and the one that is not will be gone before year-end. I have about 70% of my portfolio in act- ively managed funds and 30% in passively managed funds. Virtually all of them have expense ratios that are well below their peers. Fidelity Spartan Total Market Index FSTVX is a super cheap way to keep costs low in the core of your portfolio. The fund charges just 0 . 06% . At the time I bought in February 2009 , it was the cheapest avail- able option. Today, Vanguard Total Stock Market Index VTSAX is a better deal at 0 . 05% in expenses. Index-fund price competition has heated up for both exchange-traded funds and open-end funds, so be sure to check which will be your cheapest option, depend- ing on your investment size and the platform you are investing in. More important, whether you are paying 0 . 05% or 0 . 09% , you are getting a darn good deal. Fidelity Spartan International Index FSIVX was only charging 0 . 07% when I bought it in February 2009 . That figure has bounced up to 0 . 12% as a waiver expired, but it is still quite cheap. However, Vanguard has leapfrogged this fund, too. Vanguard Tax- Managed International VTMGX charges 0 . 10% and carries a $ 10 , 000 minimum, and Vanguard Devel- oped Markets Index VDMAX also charges 0 . 10% for a $ 10 , 000 minimum. By lowering the fees and minimum investments in its Admiral share classes, Vanguard has raised the bar. Vanguard Primecap Core VPCCX is an outstanding fund with a tiny 0 . 50% price tag. It’s closed, but Vanguard Capital Opportunity VHCOX (which I also

Our Contrarian Approach I go against the grain to find overlooked funds that may be ready to rally.