Mutual funds to buy now: Gordon Pape’s lineup of the best funds for the next 12 months: an interview with Gordon Pape
Gordon Pape, well-known Canadian mutual funds expert and author of Gordon Pape’s 1997 Buyer’s Guide to Mutual Funds (see page 15) talked with Money Digest editor Dr Chuck Chakrapani for the publication’s annual mutual funds special issue. In this interview, Pape identifies his top fund picks for the best mutual funds for the next 12 months.
MD: What, in your opinion, should the mutual fund investor do right now?
Pape: My concern right now is not the economy, which is doing all right. I am concerned about two other factors. First, it would appear that U.S. interest rates are likely to rise. Secondly, many ivestors have made so much money in the past few years, they may pull out of mutual funds at the first sign of trouble. These factors could contribute to mutual funds going down.
MD: So what strategy should we follow for the next 12 months?
Pape: If you are an astute investor, you can stand aside for the time being and use the dip in prices as a buying opportunity. More specifically, the first thing I would suggest is, take a defensive approach in buying bond funds. Buy short-term income funds.
MD: What do you mean by a `defensive approach’?
Pape: Since interest rates may rise in the next few months, a defensive approach would be to buy bond funds that mostly invest in short-term bonds.
MD: Such as …
Pape: Talvest Income Fund, Scotia Excelsior, PH&N Short Term Bond & Mortgage and Green Line Short Term Income Fund are some funds you may want to consider.
BUY SELECTED BALANCED FUNDS
Pape: Another defensive tactic is to buy balanced funds. Because balanced funds are diversified across different investment categories, there is some inherent protection against interest rates going up or the stock market crashing.
MD: Which balanced funds would you recommend?
Pape: PH&N Balanced Fund, Sceptre Balanced Growth Fund and Trimark Income Growth Fund are some of the good funds in this category.
BUY HIGHLY DIVERSIFIED INTERNATIONAL FUNDS
MD: How about international funds?
Pape: I would consider funds that are broadly based and invest in many countries. For instance, I would recommend Fidelity European Growth Fund. It has a good track record. I would also recommend Cundill Value Fund. Peter Cundill has the uncanny ability to identify value stocks. Templeton Growth Fund is another of my favourite funds. Hansberger Value Fund has no track record, but looks interesting enough. Fidelity International Portfolio Fund can be another candidate.
MD: What are your recommendations for investing in the United States?
Pape: The Altamira Select American Fund is a good fund.
CONSIDER SMALLER CANADIAN FUNDS
MD: What’s your strategy for Canadian equity funds?
Pape: Some smaller funds are doing very well. Investors should not get hung up on large well-known funds. Some excellent funds are managed by small, less well-known companies (such as O’Donnell and Sceptre). My recommendation in this category includes Sceptre Equity, Ivy Canadian Fund and Trimark Canadian Fund.
MANAGEMENT AND TRACK RECORDS
MD: What would you suggest to independent investors who want to select their own funds?
Pape: If you choose your own funds, consider the quality of management and look for its track record.
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