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MUTUAL FUND QUARTERLY REPORT

Simple, solid strategies for investing money

The economic tumult of recent years doesn't mean investors need a complicated game plan. Here are four ways to boost the odds of long-term success.

January 12, 2013|By Tom Petruno

Every value player learns that just because something has fallen doesn't mean that it can't drop further — or that it won't stay stuck at a depressed price for a long time. A hallmark of value investing is patience.

One of Crescent Fund's biggest holdings is Microsoft Corp. The shares have mostly traded between $25 and $32 since 2004. The company's many critics say it has lost its way.

Romick, however, believes that Microsoft still has significant growth potential in areas such as cloud computing, its Xbox gaming unit and its Microsoft Office products. The stock "should be getting a re-rating, in my opinion," he said. But if it doesn't, he believes his risk of loss from current levels is low. And the stock's current dividend yield is 3.4%.

Yet as he looks across financial markets, Romick said he doesn't see a lot of screaming values to add to his $9.9-billion fund, which on average has gained 6.3% a year over the last five years, beating 95% of its peer funds. He's holding 28% of the fund's assets in cash, waiting for better opportunities in stocks or bonds.

The lesson here for average investors: If you're happy with your investment mix, don't feel that you have to change it. But have a plan. Make a list of the investments (funds, stocks, bonds, etc.) you'd like to add to your portfolio if prices fell.

Then promise yourself you'll stick with that plan if and when prices do drop, assuming the basic appeal of the investments is intact.

The conventional wisdom is that compared with the big players, small investors are always at a disadvantage in the markets. One famed money manager, Jeremy Grantham of Grantham, Mayo, Van Otterloo & Co. in Boston, argues that the opposite is true.

In a client letter last year, Grantham wrote 10 success rules for individual investors. One emphasized the complete freedom that small investors have in building a nest egg, with only themselves to answer to.

When picking investments, "the individual is far better positioned to wait patiently for the right pitch while paying no regard to what others are doing, which is almost impossible for professionals," he wrote.

business@latimes.com

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