Q. I’m interested in aerospace and defense stocks and looking for a specialized mutual fund that invests in them. I want to bring this information to my investment club.
E.S., Chicago
A. The only mutual fund investing exclusively in aerospace and defense stocks is the $355 million Fidelity Select Defense & Aerospace (FSDAX).
It has attracted investor interest and additional assets in recent days due to the ongoing threat of terrorism and war. About half its portfolio is invested in aerospace and the other half in defense companies.
Portfolio manager Matthew Fruhan, who emphasizes long-term industry trends rather than current events, believes that only missilemaker Raytheon and ammunition provider Alliant Techsystems would gain significantly from a war. But he considers longer-term prospects for the industry positive as aging equipment is replaced.
The fund is down 4 percent over the past 12 months and has a three-year annualized return of 7 percent. Both results rank ahead of two-thirds of the funds in the mid-cap value group.
“It has the characteristics of a value fund right now, but it’s harder to say where it will go longer-term,” said Jack Bowers, editor of the Fidelity Monitor newsletter (www.fidelitymonitor.com) in Rocklin, Calif. “Increases in defense revenues would be a plus, but if a major airline goes bankrupt and that kills off new orders for several years, the airplane and parts makers could really suffer.”
Because it’s in such a narrowly defined segment, Bowers doesn’t believe Fidelity Select Defense & Aerospace should constitute more than 15 percent of an investor’s overall holdings. The fact that more than half of its assets are in its top 10 holdings exposes it to individual stock risks.
Fidelity Select Defense & Aerospace requires a 3 percent “load” (sales charge) and a minimum initial investment of $2,500.
Q. I’m interested in the government-sponsored PLUS loan program for college financial aid that you mentioned in a recent column. How does it work and how can I get information?
E.N., Laguna Woods, Calif.
A. The Parent Loan for Undergraduate Students (PLUS) is a federally sponsored student aid program that’s available to parents of undergraduate dependent students.
The criteria is that the student is under age 24 by Dec. 31 of the academic year in which the loan is received; unmarried; hasn’t served in the military; isn’t an orphan or ward of the court; and doesn’t have a dependent for whom 50 percent or more of support is provided.
There are no income or asset requirements, and the PLUS acceptance rate is high. The current interest rate is 4.86 percent.
Parents can receive instant approval at www.salliemae .com or at 800-891-1410. They can also apply through the college financial aid office.
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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, CA 94901-3581 or [email protected].