Q. My wife and I are in our late 60s and have $12,000 to invest. In your article on investing $10,000 in 2007, newsletter editor Sheldon Jacobs recommended T. Rowe Price New Era Fund. What is your opinion of it long term?
B.O., Batavia
More Top Picks Hiking Boots
A. Although it is a fine fund emphasizing natural resources, never put all your eggs in one basket.
Deciding whether to invest money in a sector fund always depends on the overall mix and size of your existing investment portfolio. Spreading your holdings around makes sense at any age, but especially in your 60s.
Energy represents about 65 percent of the fund’s portfolio and industrial materials 25 percent.
The $4.4 billion T. Rowe Price New Era Fund (PRNEX) had a total return of 6 percent over the past 12 months to rank in the top one-third of natural resources funds. Its three-year annualized return of 23 percent puts it below the midpoint of its peers.
Lawrence Jones, analyst with Morningstar Inc. in Chicago, recommends putting no more than 5 percent to 10 percent of an individual’s portfolio in this type of fund. Charles Ober, the fund’s manager, has “covered a number of other sectors and, as a result, this fund is more diversified than some others in its field,” Jones said.
That diversity of portfolio hurts it when energy is skyrocketing but helps when energy encounters problems. It has been one of the least volatile natural resources funds. Ober and his four-member team seek stocks selling below his estimate of private market values.
This “no-load” (no sales charge) fund requires a $2,500 minimum initial investment and has a low 0.68 percent annual expense ratio.
Q. If an international mutual fund does not hedge against currency fluctuations, how does the movement of the dollar affect the fund?
J.P., Orlando
A. Decline of the U.S. dollar has boosted many overseas funds and attracted investors.
An international stock fund that doesn’t hedge its currency risk–by taking an offsetting position in a futures contract to ease volatility–benefits from a falling dollar. The stock prices of its investments will turn into a higher value when they are translated into U.S. dollars.
“Recently the dollar has fallen in value versus the euro and that has helped international stock funds that invest in European stocks and don’t hedge those currencies,” said Mark Salzinger, publisher of The No-Load Fund Investor in Brentwood, Tenn. “Given the fact the dollar has generally been weaker and is expected to be weaker going forward, most foreign stock funds do not hedge.”
Some funds Salzinger recommends that don’t hedge currencies are Artisan International Value Fund (ARTKX), investing mostly in Europe; Dodge and Cox International Stock Fund (DODFX), a broad-based fund investing in Europe but also emerging markets; and T. Rowe Price Global Stock Fund (PRGSX), with half its assets overseas and half in the U.S.
———-
Andrew Leckey is a Tribune Media Services columnist. E-mail him at [email protected].