Don't buy into gloom

there's no better time to get started investing

Some top-notch funds require just $1,000 to get you on your way

February 17, 2002|By Russel Kinnel | Russel Kinnel,MORNINGSTAR.COM

I can remember when reading financial Web sites and The Wall Street Journal was a lot more fun.

Tech companies were raking it in, mutual funds were putting up huge returns, and the job market was so tight that companies were throwing around signing bonuses like they were acquiring players for the New York Yankees. Now, all I read about is the bear market, recession and accounting scandals.

If you've got little or nothing invested in the market, you're probably inclined to think you'd have to be crazy to invest today. In reality, there isn't a better time than today. That's not a market call - I have no idea where the market will be at the end of the year. However, it's a safe bet that the sooner you start investing, the more you'll have for retirement.

So, why not start by dipping a toe in? When TIAA-CREF raised its minimums, the best option for a $500 investment was gone. So I looked for other attractive funds that require just a $1,000 minimum initial investment, and I was surprised how many good ones there were. Many of the best funds around only ask you to pony up $1,000, and I'll mention five here.

Artisan Mid Cap: This fund shows how growth-at-a-reasonable-price investing is supposed to work. Andy Stephens and Jim Hamel look for companies with rapid growth but with stocks trading at moderate (not cheap) prices. As a result, you get tech companies like circuit-board maker Sanmina and shipping company CNF. Attention to valuations helped keep them from getting crushed in the bear market.

The fund lost just 3 percent last year and gained 27 percent in 2000. If this sounds attractive, you might want to move quickly, because the fund is set to close when about $200 million more in assets comes in.

Harbor Bond: Most well-run bond funds with low expenses require $3,000 or $10,000 to get in. And this fund charges just 0.6 percent for the services of one of the best bond managers around: Bill Gross.

Gross and his team have built one of the investment world's most impressive track records by making bold sector and interest-rate calls, but keeping those bets within the bands of their benchmark. This fund's 10-year returns are better than 94 percent of the intermediate-bond category, so I guess they're pretty good at this.

Selected American: I like to buy a good fund after a down year because you can be more confident that its portfolio isn't overheated. Lately this fund has suffered from weakness in some of its top stocks such as Tyco International, American Express and Merck. Managers Chris Davis and Ken Feinberg are still doing the same thing that's built this fund's great record, so I think the fund and some of the above holdings will do just fine in the end. The fund makes a decent first fund because of its stable management and large-cap focus.

Harbor International: This is one of the best foreign funds around. Manager Hakan Caste- gren is a bold value investor willing to patiently wait for the market to come around to his way of thinking. He prefers natural-resources companies like BP and restructuring plays like Diageo. Only a handful of foreign funds can claim better 10-year records than this fund.

Ariel Appreciation: Manager Eric McKissack is a pretty patient guy, too. McKissack likes to buy consumer stocks when they're trading at a 40 percent discount to his estimate of their value. Corporations like the same thing, so the fund often gets paid when a holding is acquired in a merger.

McKissack has been with the fund since its 1989 inception and he's running about 2 percentage points ahead of the mid-blend category's annualized returns.

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