Q. We’ve owned Janus Fund in our retirement account for 10 years. The 1990s were outstanding, but the last two years ate up most of those gains. I hate to jump ship. We’re both 47 years old. Will this fund come back?
E.P., Richmond, Va.
A. In the “good old days,” this fund was a world-beater that excelled through its big bets on technology, telecommunications and media.
After those areas tanked, it diversified its portfolio by buying larger stakes of financial firms such as Bank of New York, industrial companies like Boeing and staple goods firms such as Colgate-Palmolive.
Yet those moves didn’t transform it into a tame fund, since it remains a growth-oriented vehicle with large positions in some aggressive stock names. For example, its holdings of AOL Time Warner and Linear Technology haven’t helped results lately.
This $24 billion fund declined 5 percent over the past 12 months to rank in the lowest one-third of all large growth funds. Its three-year annualized decline of 7 percent places it just below the mid-point of its peers.
“Janus Fund is still a fund you can hold onto, but not the type on which you’d anchor your entire portfolio,” cautioned Brian Portnoy, analyst with the Morningstar research firm. “It’s going to be more volatile than the average core holding, and its manager can’t make massive changes because its large asset size dictates he’s largely stuck with what he has.”
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While Janus Fund has been around since 1970, manager Blaine Rollins came on board the beginning of 2000.
This “no-load” (no sales charge) fund requires a $2,500 minimum initial investment.
Q. If my mutual fund automatically reinvests long- and short-term capital gains, can I use the capital gain reinvestments to increase my basis in the fund?
P.M., via the Internet.
A. Yes, it works just like dividends. If you had gains in your mutual funds reinvested rather than distributed to you, those gains are added to your cost basis.
The cost basis is the original price the fund manager paid for securities in the fund. When he sells some of those holdings, he must notify the IRS of capital gains accrued from the sale.
“When I pay $10 and I receive $1 in capital gains and it’s reinvested, then effectively I spent another $1 on shares and now have an $11 cost basis,” explained Robert Greisman, tax partner at BDO Seidman LLP in Chicago. “Later, when you sell, you must figure out your gain or loss, which is added to your cost basis.”
Record every new contribution you make and every distribution that got reinvested, said Marilyn Capelli Dimitroff, president of Capelli Financial Services Inc., Bloomfield Hills, Mich. “Many people pay too much in taxes because they only look at what they initially contributed and don’t keep adding on those reinvestments,” she said.
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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.