Q. I’m 45 years old and own a few mutual funds, including American Century Growth. Does this fund have a good future?
–A.R., via the Internet
A. The key word here is “big.”
This is a big fund that owns big companies and makes big bets on groups such as health care and technology. Unfortunately, big hasn’t meant better recently for growth funds.
The $6.25 billion American Century Growth Fund (TWCGX) declined 20 percent in value over the past 12 months yet still ranked in the top one-fourth of all large growth funds. Its three-year annualized decline of 4 percent places it just above the midpoint of its peers.
Health care and technology each make up more than one-fourth of the fund’s concentrated portfolio. Other large groups include staples, financials and retailing. In 2000, half of its assets were in tech.
“Although it hasn’t shot the lights out, American Century Growth has posted respectable gains during bull markets, and it’s held up reasonably well in the recent bear market,” observed Christopher Davis, analyst with the Morningstar research firm. “It would be appropriate as a core holding in an individual’s portfolio because of its solid record and modest volatility.”
This relatively aggressive fund boasts a seasoned management team. Kim Goodwin had success with other funds before joining the group in 1997. Gregory Woodhams and Prescott LeGard are the other team members.
Its top stock holdings were recently Pfizer, PepsiCo, Wal-Mart Stores, Intel, American International Group, Home Depot, Microsoft, Oracle, Abbott Laboratories and General Electric. This “no-load” (no sales charge) fund requires a $2,500 minimum initial investment or $1,000 for an individual retirement account.
American Century Investments, formerly Twentieth Century Investments, had only two funds until the early 1980s. Today it is a diversified family of 60 mutual funds best known for its growth portfolios. J.P. Morgan acquired a 45 percent stake in American Century in 1998.
Q. My wife and I are 75 years old and getting along comfortably on our pensions and Social Security. We also are taking mandatory distributions of $15,000 annually from our individual retirement accounts and an annuity. We want to invest the distributions. Any suggestions?
–T.S., via the Internet
A. There’s no need to do anything fancy, though you should use this opportunity to diversify your holdings a bit.
“You could expand your budget to include taking a trip you’d always wanted to take or to make contributions to the 529 college savings plans of your grandchildren,” advised Vern Hayden, certified financial planner with Hayden Financial Group LLC in Westport, Conn. “You can afford more risk and, therefore, can focus on growth in your investments, with mutual funds perhaps the best choice to accomplish that.”
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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].