Mutual Funds Let Pros Do the Heavy Lifting Series: YOUR MONEY
Guy Halverson, writer of The Christian Science Monitor, The Christian Science Monitor
TALK radio has been profitable for Shawn Splane. And, so have mutual funds, where some of his broadcast earnings have been invested.
Mr. Splane is a talk show producer at radio station KING-AM in Seattle. He began investing five years ago, in April 1990.
Through carefully managing their finances, Splane and his wife have acquired a nest egg invested in 12 mutual funds.
When Splane initially began setting aside money in the early 1990s, he thought of buying individual shares of stock. But he quickly realized that given the demands on his schedule, it was better to leave the selection of financial instruments such as equities to professional money managers. And Splane wanted broad diversification among different types of investments.
"With a degree in economics from the University of Washington, I can crunch numbers about as well as anyone," he says. "But what makes mutual funds so attractive is that one doesn't need to do that." Each mutual fund, Splane notes, is supervised by an investment manager. The investment manager can spend the hundreds of hours necessary to study up on and select the large number of stocks or bonds that will make up the fund, and that, hopefully, should post earnings growth over time.
All Splane's mutual-fund expertise "is self taught," through reading books and magazines, he says. But Splane couldn't be more pleased. His funds have beaten the Standard & Poor's 500 index every year except 1994, when stock prices slumped. Last year the S & P 500 posted a total return of plus 1.31 percent. Splane's mutual funds were down 2.2 percent. But he wasn't alone. US stock funds were down 1.69 percent last year.
But 1995, Splane says, should be better. He expects his funds to equal, or exceed, national market indexes.
During the past 10 years, equity funds posted an average annual return of around 13 percent. Whether that pace will continue is a wide-open question.
"For the next few years, investors are going to have to lower their expectations regarding total returns on investments," says Sheryl Durham, bond portfolio manager at Glenmede Trust Company, Philadelphia, a private investment bank.
"The downturn that a lot of funds ran into last year may not be over," says Gregory Dorsey, editor of "Wall Street Bargains," a monthly stock market newsletter published in Alexandria, Va. …