Non-Ret: Global Equity

My pick: MDISX Mutual Discovery Fund/Z

The next recommendation for this hypothetical non-retirement account is a Global Equity fund or World Stock. This is an international fund that has a large US component and generally also invests some in emerging markets. money

Since I am building a portfolio that could be built in this specific order, I picked a blend category first and this broad category second. I think international exposure is good for diversifying, but owning only an emerging markets fund or specific overseas category along with only a domestic Mid Cap Blend, would be pretty narrow, so World Stock it is. money

The average turnover for funds in this category is 58.25% and the average expense ratio is 1.45%. Searching through the offerings and looking at the criteria I care about, I find 5 that look promising but quickly note that 2 are closed to new investors (OAKGX, SCOBX). A third (BJGQX) has $1000 minimum for subsequent investments and an above average expense ratio so despite a good track record, I rule it out. money

That leaves only two options, but they are among the top performers, have $100 minimum for subsequent investments and lower than average turnover and expenses. MDISX Mutual Discovery Fund/Z and JSVAX Janus Contrarian Fund have both performed really well over the last 5 years, 3 years, 1 year and YTD. This is good reason to pause and wonder if these funds are not due to slow down or pull back. Since our proposed portfolio will invest over time, we have reduced the risk a down-turn poses and the average Price to earning ratio of stocks held in these funds is not too high (13.4 for MDISX and 17.5 for JSVAX according to Morningstar) so the holdings do not seem overpriced, on average. money

Here is a breakdown:

Portfolio Turnover (Average 58.25%)
*MDISX 25.69%
JSVAX 42.00%

Expense Ratio (Average 1.45%)
MDISX 1.04%
*JSVAX 0.93%

Performance




So MDISX has much lower turnover which could help keep capital gains tax low. It has a slightly higher expense ratio, but only by 0.11% It has performed about the same, but slightly better recently than JSVAX. For those reasons and because I anticipate I will pick some Janus funds when looking at Domestic Growth stocks, and I want to pick from different fund companies if I find good options, my pick here is MDISX. money