To soothe New York nerves chafed by constant exposure to the securities markets, sit down for a talk with a mutual fund veteran from at least 500 miles out of town.
I tried a dose of this old-fashioned remedy the other day, and it helped.
Through a 90-minute lunch, Joseph Keating, chief investment officer at Old Kent Financial Corp.'s $6.1 billion Kent Funds group of Grand Rapids, Mich., spoke hardly a word about e-trading, 24-hour markets or the next move in gold.
Instead, Keating laid out a case for sticking with long-term investments in both stocks and bonds, in spite of all the uncertainties those markets may pose. He said he thinks the stock market is right about where it should be, and bonds are a bargain.
A calm, blind-faith approach is a special luxury for individual fund investors, who don't have to answer to any investment committee while they ride out a rocky spell like the third quarter of 1999.
"I believe the forces are in place to keep us in a low-inflation, low-interest-rate environment," Keating said, not in the least distracted by a gleeful wine-tasting marathon of New Yorkers at the tables around us.
Keating, who has spent 20 years in investment management, the last 12 with the Kent funds, concentrates on big-picture macroeconomic matters as he oversees the managers of the group's five stock, six bond and three money-market funds.
"We've had a big expansion in stocks' price-earnings ratios, and our opinion is that that game is over," he said. But he said there's no reason for P-Es to fall significantly either. "So the stock market can grow along with growth in corporate earnings," he said.
The Kent Growth and Income Fund, the group's biggest fund at $968 million in assets, is a large-stock fund that owns about 220 stocks in the Standard & Poor's 500 Index, keeping the same industry weightings as those of the index while attempting to choose the best stocks within each industry group.
Over the last five years, Kent Growth and Income has gained an average of 22 percent a year, outperforming 90 percent of all other funds and 65 percent of the funds with the same investment objective, according to Bloomberg analytics.
It has not kept pace, though, with the S & P; 500 itself, which has returned 25 percent a year over that stretch, or its sister fund, the Kent Index Equity Fund, based on the S & P; 500, which has returned 24 percent.
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