Q. My husband and I own shares in Vanguard Health Care Fund. What is your opinion of this fund?
R.D., via the Internet
A. This popular fund tried to slow down its rapid asset growth by requiring a hefty $25,000 minimum initial investment. That didn’t exactly work, and it holds more than $17 billion.
Such enormous size means it has lost some flexibility and increasingly has had to put money into dominant pharmaceutical firms rather than other types of health care. Its largest stock holdings were recently Pharmacia, Pfizer, American Home Products, McKesson, Abbott Laboratories, Eli Lilly, Johnson & Johnson, Merck, Roche Holdings and HCA.
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Vanguard Health Care Fund (VGHCX) declined 0.63 percent over the past 12 months to rank in the upper one-fourth of specialty health care funds. Its three-year annualized return of 17 percent is in the top half of its peers.
Despite its asset size and high minimum, it is well run and provides more diversity than most other sector funds.
“It is in a very broadly diversified, solid sector that represents more than 15 percent of the entire economy, and I have always over-weighted it in portfolios that I manage for outside clients, “said Daniel Wiener, editor of The Independent Adviser for Vanguard Investors (www.adviseronline.com), 7811 Montrose Rd., Potomac, Md. 20854. “It includes domestic and international companies, drug stocks, biotech, managed-care companies and technology companies, so you can own more of it than you would a typical sector fund.”
Wiener believes Vanguard Health Care Fund is an excellent fund that should do well for its investors over the next 5 to 10 years. He notes that it has been closed to new investors at certain junctures in the past and this step could be taken again at some point.
This “no-load” (no sales charge) fund managed by Edward Owens since its inception in 1984 levies a 1 percent redemption fee within 12 months. Annual expense ratio is a low 0.34 percent. Management states that it normally invests at least 80 percent of assets in stocks of companies involved in development, production or distribution of products and services related to treating or preventing diseases and other medical infirmities.
Q. I have $50,000 to invest and was told by a professional that unless I have at least $100,000 to invest, I should only consider mutual funds. That’s because $50,000 isn’t enough to properly diversify my portfolio. Do you agree?
J.L., via the Internet
A. It’s a bit of an overstatement, since you could find some dependable stocks worth including in your asset mix and $100,000 really isn’t a magic number.
However, it wouldn’t make sense to have your $50,000 divided among just a few stock names because risk would increase significantly, especially if that’s all your money. So you’re probably better off putting much, if not necessarily all, in mutual funds.
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Andrew Leckey answers questions Sunday in Business and Tuesday in Your Money. Address inquiries to Andrew Leckey, P.M.B. 184, 369-B Third St., San Rafael, Calif. 94901-3581, or by e-mail at [email protected].