Q. I’m considering moving some of my portfolio into Fidelity Puritan Fund. What’s your opinion of this fund?
W.T., via the Internet
A. It’s definitely not a Johnny-come-lately investment. This classic balanced fund that includes stocks and bonds in its portfolio has been humming quietly along since 1947.
It boasts two highly successful veteran managers, with Stephen Petersen selecting stocks and Kevin Grant picking bonds. The annual expense ratio of 0.63 percent is low, and the fund doesn’t make risky bets on stock groups or interest-rate fluctuations.
The $20 billion Fidelity Puritan (FPURX) is down about 2 percent over the past 12 months, with a three-year annualized return of 3 percent and a five-year annualized return of 9 percent. All three results rank in the upper third of all balanced funds.
“Puritan won’t give you `nosebleed’ returns, but it will let you sleep at night through any market conditions,” said Jim Lowell, editor of the independent Fidelity Investor newsletter (www.fidelityinvestor.com). “It’s especially good for an investor who is 10 years away from retirement or already retired, though it’s probably too conservative for an investor with 15 years or more to go before retirement.”
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For a more aggressive investor with a longer time horizon, a growth-oriented choice such as Fidelity Blue Chip Growth (FBGRX) would provide greater capital appreciation, Lowell believes.
Fidelity Puritan currently has 61 percent of its portfolio in stocks, 34 percent in bonds and the rest in cash.
This “no-load” (no sales charge) fund requires a $2,500 minimum initial investment.
Q. My company will only allow me to put 6 percent of my salary into its 401(k) plan. I was told that I make too much ($100,000) to contribute more. Is this true?
G.B., via the Internet
A. Yes, there are 401(k) limits under what’s called “non-discrimination testing.”
Such regulations limit how much “highly compensated” employees such as you can contribute to the plan based on the average participation rate of the other workers in the plan.
To determine the allowable percentage for these employees, the plan must be tested at least annually.
So, for 2002, any employee making $90,000 or more has his or her rate of contribution conditioned on the average contribution rate of those making less than $90,000.
And because companies don’t want to be in violation of regulations, they tend to be a bit more conservative than the percentage they might allow.
“For example, if a firm’s eligible employees making less than $90,000 put an average of 5 percent of their pay in the 401(k) plan, highly compensated employees can only do 2 percentage points more, or 7 percent, as an average,” said David Wray, president of the Profit Sharing/401(k) Council of America in Chicago.
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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 e-mail andrewinv @aol.com.