V.9:7 (267-269): Asset Management Funds In Review by Charles Idol

V.9:7 (267-269): Asset Management Funds In Review by Charles Idol
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Asset Management Funds In Review by Charles Idol

Many small investors would be grateful for a service that adjusted their portfolio for diversification and modified the mix to meet the changing financial climate. While money management services have been available for such services, usually they required a substantial portfolio and charged a hefty fee. These barriers were hurdled in 1989, when Vanguard and Fidelity, the giants of the mutual fund industry, among others, introduced money management funds. Enough time has passed to permit evaluation of their performance. How did they do?

Vanguard calls its money management fund the Asset Allocation Fund, while Fidelity refers to its fund as the Asset Manager Fund. The funds are similar in more than name: each has a policy of diversification among stocks, bonds and cash reserves, and each has the objective of solving the difficult problem of timing. The mix of the fund holdings is adjusted to maximize return and minimize risk by anticipating market conditions. Fidelity makes these decisions in-house, while Vanguard employs the Mellon Capital Management Corporation as investment adviser for the fund.

Minimum initial investment is modest for each fund: Vanguard requires $3,000, and Fidelity $2,500. Subsequent investments may be as little as $100 or $200. Both funds offer automatic reinvestment of distributions, and both are no load.

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