Q. I am 72 years old and have been investing in Fidelity Utilities Fund since 1992. Should I continue to hold this fund or transfer to a bond fund? S.S., via the Internet
A. It’s definitely not your father’s utilities fund. At your age, you might prefer something less aggressive and more conservative.
Its top holdings are mostly diversified telecommunications companies, which provided solid total returns until they hit the wall. So this is not the safe-haven, income-producing investment that its name implies.
Furthermore, its manager, Martin Zinny, is a utilities analyst who was put in charge March 1. It is his first position as a fund manager.
The $1.32 billion Fidelity Utilities Fund (FIUIX) fell 17 percent over the past 12 months to rank in the lower half of all utilities funds. Its three-year annualized decline of 9 percent puts it in the lowest 10 percent of its peers. Its five-year annualized return of 6 percent is in the lower half of similar funds.
“For an income investor, there are safer havens that could deliver income to your doorstep, while for an aggressive investor, there are better capital appreciation routes to take,” advised Jim Lowell, editor of the independent Fidelity Investor newsletter (www.fidelityinvestor.com), 7811 Montrose Rd., Potomac, Md. 20854.
Rather than move into the bond market as interest rates are rising, Lowell suggests Fidelity Spartan Money Market Fund (SPRXX) or Fidelity High Income (SPHIX).
Telecom services firms comprise 60 percent of the utility fund’s portfolio and utilities 26 percent. There’s also a smattering of energy, industrials and technology.
This “no-load” (no sales charge) fund requires a $2,500 minimum initial investment. It has a low annual expense ratio of 0.78 percent.
Q. I am 65 years old and have been retired for several years. My annual income is around $50,000. Last year I made $2,500 through a freelance job at home. Can I put the money into an individual retirement account or Roth IRA? R.F., via the Internet
A. Yes you can, because your freelance job qualifies as earned income.
The various IRA types include deductible, nondeductible and Roth. With the Roth, withdrawals after 59 1/2 are not generally taxed. You pay your taxes on the front end by contributing after-tax dollars.
“You could definitely put the money into a conventional IRA because there’s no income limit if you’re not in a company plan,” said Ed Slott, editor of Ed Slott’s IRA Advisor (www.irahelp.com) in Rockville Centre, N.Y. “With a Roth IRA, if your income is under $95,000, you can put money in up to the amount of your earned income.”
The Roth may make the most sense in your case.
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“The advantage of a Roth IRA is that it doubles as a savings account,” said Slott, noting that the limit this year is $3,000 plus an extra $500 for those who are 50 or older as of the last day of this year.
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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.