Fund Profile: Monetta Young Investor Fund
by Ann C. Logue
Bob Bacarella is on a mission. “I want to spark the interest of kids so that they start saving,” he says. That’s why the manager of the four-star Monetta Fund launched the Monetta Young Investor Fund in 2006. It’s a no-load fund with a $250 minimum investment for those committing to an automatic investment plan, allocated to stocks in companies that children should recognize, and with a financial literacy program rolled into the regular stream of shareholder reporting.
The Monetta Young Investor Fund has an unusual structure. Half of the assets are invested in S&P 500 exchange-traded fund shares in order to give it low-cost exposure to the broader market indexes. The remaining assets are invested in shares of companies that children are likely to recognize, mostly but not entirely retail stores, restaurant chains, and other consumer growth stocks. The idea is to give the fund performance that can match or beat the market while still holding shares in companies that children can relate to. Bacarella notes that the ETF position cushioned the effects of the decline in consumer discretionary stocks last year.
Other than the 49.9% ETF position, the fund’s largest holding at the end of 2007 was The Walt Disney Company (NYSE: DIS), at 4.18% of assets, sitting squarely in that kid-friendly, brand-name consumer space. The second-largest holding is a little different. It’s Google Inc. (Nasdaq: GOOG), at 3.36% of assets; most school-age children have enough experience online to know all about the power of Google. The third-largest holding is McDonald’s Corporation (NYSE: MCD), purveyor of Happy Meals the world over.
The fund’s short life has coincided with a terrible stock market. Thus far in 2008, the fund is down 9.52%, less than the 10.77% decline for the average Large Growth fund. The S&P 500, by contrast, is up 6.23%. For the past year, the Young Investor fund is down 5.13% compared to the rest of the Large Growth category, which is down an average of 5.77%. Expenses are relatively low, with a management fee of 0.55% and a 0.25% 12b-1 fee. Other expenses total 0.63% for a total expense ratio of 1.44%, although the fund plans to waive fees until Dec. 31, 2008 to keep the expense ratio at 1%. When the American consumer recovers, this fund is likely to show smart performance.
To keep kids interested, the fund comes with a financial education program that includes activity books, a wallet, and other age-appropriate information to help kids learn more about how the economy and investing work. The fund’s website has online activities and a stock market game (this is for the generation that has always known about Google, after all), and the firm has commissioned a series of short books offering fables about inflation, savings and the like to make it seem less like homework. Monetta occasionally sends its Young Investor Fund shareholders gifts such as a book for saving the 50 state quarters. “The first step to savings is learning to collect,” Bacarella says. “Everything else will follow.”
All Monetta shareholders can earn Tuition Rewards (www.tuitionrewards.com), which are similar to frequent flier miles and can be applied toward tuition at 200 participating colleges, most of which are smaller liberal arts institutions. These are based on 2.5% of the account value and are credited twice each year. Still, the Young Investor Fund is not designed as a college savings vehicle. It does not carry the tax advantages of a 529 account. However, if it is set up as a custodial account in the child’s name, income will not be taxed as long as the child’s total earnings are less $850, and it will be taxed at the child’s rate as long as the child’s earnings are less than $1,700. (After that, everything is taxed at the parent’s top marginal rate.) A kid with a custodial account might turn 18, cash out the fund, and use the money to follow his favorite band on tour instead of going to college, but one would hope that the educational component of the fund would reduce this risk.
“This is not a gimmick. It’s a passion,” Bacarella says. In his ideal world, McDonald’s would put Monetta storybooks in its Happy Meals instead of movie tie-in toys. The fund’s challenge is not performance, which is on par with that of similar funds. Instead, it’s that too few American parents are savers themselves, which means that they don’t understand the importance of teaching their children about money. For those who do want to get their children started, this fund is one to check out.
Correction to last week’s column on the Vice Fund:
Last week’s profile had two mistakes in it. First, co-manager Allen Gillespie’s first name was misspelled. Second, Allen Gillespie and Charles Norton did not found the Vice Fund. They were hired to manage it by the fund’s creator, Mutuals Advisors, in 2005. I regret the errors.
This concludes this week's issue of MutualsAdvisor.com Weekly. We encourage you to visit our website to review past issues of MutualsAdvisor.com Weekly: http://www.mutualsadvisor.com/newsletter.cfm
Disclaimer and Important Information
The opinions and statements included herein are based on sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. We have not independently verified the information contained herein. This information is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. We encourage you to consult with independent financial advisors with respect to any investment in the securities mentioned herein.
You should review a complete information package on all companies, which should include, but not be limited to, the company's annual report, quarterly reports, press releases and all regulatory filings. All information contained in this profile should be independently verified with the subject company. The foregoing discussion contains forward-looking statements, which are based on current expectations, estimates and projections, and differences from such expectations, estimates and projections can be expected. BFP does not purport to be a complete analysis of every material fact respecting any company, industry, or security.
Any opinions expressed on this site are statements of judgment as of the date of publication and are subject to change without further notice, and may not necessarily be reprinted in future publications or elsewhere. Neither BFP nor its members, managers, officers, or employees/consultants accept any liability whatsoever for any direct or consequential loss arising from any use of its publications or their contents.
==========================
==========================
MutualsAdvisor.com Weekly is a free email newsletter from MutualsAdvisor.com (http://www.mutualsadvisor.com)
This is an email newsletter from MutualsAdvisor.com, provided free of charge to our customers. You are receiving this newsletter from MutualsAdvisor.com because you visited our web site and signed up to receive a copy.
We respect your privacy and therefore this email has been sent directly from MutualsAdvisor.com. MutualsAdvisor.com does not provide our email lists and other data to third parties. This is consistent with our Privacy Policy as outlined on our web site. You may review our Email Policy at http://www.mutualsadvisor.com/emailpolicy.htm
=================================================
Copyright © 2008 Business Financial Publishing, LLC
publishers of MutualsAdvisor.com Weekly
All rights reserved.
Business Financial Publishing, LLC
1015 18th St. NW Suite 508
Washington, DC 20036
|
