Q. I have American Century Balanced Fund in my individual retirement account and my wife has American Century Vista Fund in her IRA. We’re retired, but don’t need these funds for income. What’s your opinion of them?
G.S., Webster, Mass.
A. They’re two very different animals. The only thing they have in common is that they’ve gone down in value over the past year.
Balanced is a conservative portfolio with performance about even with most of its peers. Vista is an aggressive fund that has outperformed its rivals. Vista will likely outperform Balanced in a bull market, while the opposite would be the case in a bear market.
“I’d recommend putting no more than 5 percent of a portfolio into Vista, while you could put 25 percent into Balanced,” advised Sheldon Jacobs, editor of The No-Load Fund Investor (www.sheldonjacobs.com) in Irvington-On-Hudson, N.Y. “Vista is for a risk-taker and is down 50 percent in this bear market, while conservative Balanced is for people with lower aspirations and greater interest in protecting their assets.”
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The $562 million American Century Balanced Fund (TWBIX) is down 8 percent over the past 12 months and had a three-year annualized decline of 3 percent. Those results rank around the midpoint of balanced (stock and bond) funds.
It has 60 percent of assets in stocks, emphasizing financials, technology and health care.
On the other hand, the $1 billion American Century Vista Fund (TWCVX) is down 19 percent over the past 12 months and had a three-year annualized return of 2.5 percent. Those results are in the top one-third of mid-cap growth funds.
It has 37 percent of its holdings in health care, with concentrations in services and financials.
Both funds are “no load” (no sales charge) and require a $2,500 minimum initial investment.
Q. I recently received $200,000. I will not need this money for 7 to 10 years, when I plan to use it to buy a retirement home. I want to earn interest, but also protect the principal. Would Treasury securities be a good choice?
A.K., via the Internet
A. They’re risk-free investments backed by the full faith and credit of the U.S. Treasury. Treasury notes have maturities of between 2 and 10 years.
So long as you hold until maturity, the principal is protected and you’re guaranteed the face value of the bond and the coupon rate paid semi-annually. However, should you sell before then, they’re traded on the open market with no guarantee you’ll get back what you paid or the face value.
“Don’t buy anything longer than 7 to 10 years because that does subject you to the interest rate risk of having to sell prior to maturity,” warned Greg McBride, an analyst with Bankrate.com.
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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.