Tags: Benz | investments | fund | forever

Morningstar's Benz: Investments You Might Be Able to Hold Forever

By    |   Wednesday, 12 November 2014 02:28 PM

Following up on Warren Buffett's aphorism that his preferred holding period for an investment is "forever," Christine Benz, director of personal finance for Morningstar, put together a list of candidates on Morningstar.com.

"Having a long holding period helps limit trading, and that reduces the transaction and tax costs that can drag on your portfolio's take-home total return," she notes. "Perhaps even more importantly: If you take care to buy and hold a sturdy basket of core investments, that can help cut the temptation to trade in and out of the market and glom on to whatever is hot today."

They include stocks, actively managed mutual funds and index funds. The stocks chosen "all have wide economic moats, meaning that our equity analysts believe they have sustainable competitive advantages that will help them fend off the competition in their industries for many years," Benz explains. And the mutual fund and exchange-traded funds chosen are "sturdy, low-cost options with shareholder-oriented management teams."

Here are three samples:
  • Stock — Google (Ticker: GOOG). "It's notably difficult for technology firms to earn a moat, but Google has managed to do so by dominating the online search market," Benz writes. "Users are so familiar with Google search that they're unlikely to switch to a competing provider."
  • Actively managed mutual fund — Dodge & Cox Balanced (DODBX). "Any one of the Dodge & Cox funds would fit well under the 'hold forever' banner, because they have everything the buy-and-hold investor should be looking for: low costs, a well-articulated and consistently executed strategy, stellar stewardship, and stable management," Benz says.
  • Index fund — Vanguard Total Stock Market (VTI or VTSAX). "It offers exposure to U.S. stocks of all sizes and styles and could reasonably serve as an investor's sole equity fund," she writes. It has "ultra-low costs" too.
Meanwhile, new data from Bank of America indicate you might want to stay away from actively managed funds, at least when it comes to large-cap stocks.

Only 18 percent of U.S. actively managed, large-cap stock funds outperformed the Russell 1000 index of large-cap stocks for the first 10 months of the year, according to BofA, the Financial Times reports.

That was the worst showing for active managers in a decade. Since BofA began tracking the numbers in 2003, only once have more than 50 percent of active managers beaten the index — in 2007.

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Following up on Warren Buffett's aphorism that his preferred holding period for an investment is "forever," Christine Benz, director of personal finance for Morningstar, put together a list of candidates on Morningstar.com.
Benz, investments, fund, forever
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2014-28-12
Wednesday, 12 November 2014 02:28 PM
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