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George Benigno
interviewed by Brian Hecht on September 27, 1995
"It is much easier to start young..."
George Benigno is a stock-picking expert for Mutual Funds Magazine, he also runs one of the largest mutual fund databases in the business.
Tripod: You always hear that mutual funds are the best bet for a first-time investor. Why should young investors be thinking about mutual funds?
GB: Unfortunately, in this country, if you don't start young, you're not going to have enough. It's also unfortunate that by the time most people wake up, then it's very difficult to play catch-up. And it's always advantageous that you start as early as possible and, with mutual funds offering dollar-cost averaging, take a long-term point of view. Even with substantial amounts of money down the road, with inflation the way it's going -- at least you'll be better off than current retirees today.
Tripod: But why mutual funds, instead of individual stocks?
GB: Because they're the investment of choice, they're very popular, and they give you the diversification you need.
Tripod: You mentioned dollar-cost averaging. Can you explain why that's beneficial?
GB: Dollar-cost averaging offers three distinct advantages. Number one, it gives all people of all financial means the opportunity to invest small amounts of money. By dollar-cost averaging, you're diversifying your risk in both high and low markets. You're accumulating shares in an up market at a higher price, and you're accumulating shares at a lower price.
Tripod: Some people talk about mutual funds as if they're virtually risk-free. But mutual funds can still be risky, can't they?
GB: Of course. They do fluctuate, and there are all types of funds for all types of investors, depends on how risk-averse you are. But over the long haul, good quality value funds, growth & income funds, even aggressive growth funds -- over the long term, stock markets would be the only place you're going to accumulate any form of wealth. And again, mutual funds do give you the broad diversification of many issues versus, say, taking one bet on one particular company.
Tripod: What are the first steps in choosing a mutual fund? How do you narrow down the choices?
GB: There's a smorgasbord of information out there, including the various publications that our organization makes available at reasonable cost. It could be, maybe, intimidating or overwhelming, but that's probably the best place to start. To take a look at the various publications that are available at the newsstand, like our magazine, or any of the competitors' magazines. Maybe ask parents or people who have experience -- get some personal insight.
Tripod: Are there any on-line resources you find particularly useful?
GB: There's many on-line. Virtually all on-line services -- the Web is extremely popuar -- but right down to CompuServe and America Online -- all different types. The funds themselves are advertising and all different types of services making information available and readily seen. It's mind boggling.
Tripod: What about the covers of all these magazines that advertise "Hot Funds for the 90s!" Is that kind of advice worth anything?
GB: I would say that's a personal scenario. It's in the eyes of the beholder. From a personal point of view, would I invest that way? Probably not. But any information is better than no information.
Tripod: They say that young investors can afford to make riskier investments since they have a longer time horizon. Do you agree with this?
GB: That is definitely true. When I was in the industry, I found many widows in aggressive funds, and I found young kids in government security funds. And, unfortunately, it should have been the other way around.
Tripod: Should the young investor consider anything other than stock funds?
GB: When you say young -- under 30? -- probably not. He's going to retire, based on today's standards, at 65 -- he's got 35 years to make it work.
Tripod: Lots of these funds now offer a low minimum investment that's attractive to young investors. Does that sort of plan have any correlation with the quality of the fund? Are you getting a better or worse fund based on what the minimum investment is?
GB: No. By no means does that have any bearing on the quality of the fund. That's where you need to do some investigation. But what the low minimum in these dollar-cost averaging programs offer is that often, to the masses, before, this was not available.
Tripod: How much should someone know about a fund manager before they invest?
GB: There is a fairly new requirement set down by the SEC that management be known. It is very critical. There are excellent managers out there that have done a very good job long term. And I think it's just another point of view that should be known. It's nice to know that the manager's been at the helm for quite a while, he has an excellent track record in all kinds of markets, and he's proven himself, and people may -- or should -- feel a little more comfortable.
Tripod: Is there any magic number that you look for. Should the manager have been there five years? Ten years?
GB: Difficult to say. But normally, a manager that's been through both types of markets -- up and down.
Tripod: If you had to recommend one or two funds for a complete novice investor to look into -- what would you recommend.
GB: The only thing I will say is that it is imperative that you do something. Doing nothing -- even if you go into the worst dog, and of course you don't want to do that -- but you're going to do more irreversible harm by not doing something. It's much easier to start young than it is when you're middle-aged and then you're trying to play catch-up.
You can access the Web version of Mutual Funds Magazine at
http://www.mfmag.com
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