Confessions of a Mutual Fund Fanatic (Part One)

by Warren Boroson, syndicated columnist for the Daily Record

In the early 1960s, when I was a beginning financial writer, was I ever ignorant of mutual funds! Someone told me that Vanguard Windsor was a good fund to buy - and I didn't want to expose my ignorance by asking, how do I buy it?

Since then I have written books on mutual funds, had a radio program on the subject, and interviewed hundreds of portfolio managers.

Alas, my efforts on behalf of mutual funds may have come to an end. The little daily newspaper I work for is in big financial trouble, and the editor wants me to write only very local stories. Which seems to mean the end of my financial column syndicated by Gannett News Service.

From writing about mutual funds, one lesson I've learned is: Success is fleeting. In 1994, I put together a booklet for William Rukeyser, called “Success Secrets of 20 Top Mutual Fund Managers.” Among the “top” managers are names I don't even recognize now: John Kawaske of USAA Mutual Income, Michael Haines of Founders Frontier, Monica Wieboldt of Dreyfus Intermediate Term Bond Fund, Christopher Wiles of Fortress Utility.

A book I wrote, “The Ultimate Mutual Fund Guide,” recommended one fund above all others: PBHG Growth. Which proceeded to disgrace itself. Then there was the Mutual Fund Hall of Fame that I started on my radio program. The first entrant was Twentieth Century Giftrust. Not an auspicious beginning.

Still, to this day I believe that mutual funds are what John and Jane Q. Public should invest in, and - unless they are as well-informed as I am - in index funds to boot. And I'm delighted at the popularity of no-brainer target-retirement funds, and appalled that I didn't think of them first.
Memorable people:

I asked Peter Lynch of Fidelity Magellan what other career he might have chosen. He thought and thought. Then said, “Stock market analyst.”

At my request, he was autographing a book he had written. “What should I write?” he asked. “Thanks for teaching me everything I know,” I suggested. He grinned. And wrote: “Thanks for giving me all those great ideas over the years.”

I was introducing John Bogle of the Vanguard Group to an audience in New Jersey. “There was an Englishman who, before he died, specified that on his gravestone be written: 'A friend of Keats.' That was his greatest accomplishment in life. On my gravestone, I want them to write, 'He helped bring John Bogle to the Ramada Hotel in Saddle Brook, N.J.' Bogle laughed. I got him to laugh again when I told him that one of the virtues of an index fund is that the same guy who isn't running it today is the same guy who won't be running it in the future.

A great forum. Max Heine of the Mutual Series funds, Philip Carret (whose hobby was witnessing eclipses) and someone very smart from the AIM funds. Moderated by William Lippman of the Franklin funds. The panelists were surprised that, despite their differing strategies, all had done about the same - and very well indeed. Said Heine, “All roads lead to Jerusalem.”

Helen Young Hayes, a brilliant woman who managed Janus Overseas, was not included on Money magazine's list of best young portfolio managers. She had never been eager to cooperate with the press, and Money seemed to resent that. I upbraided Money, in print, and received a gracious note from Helen herself.

Tom Bailey, who founded the Janus funds, in answer to my question: Might the funds ever invest in derivatives? “Derivatives are beside the point. The point is to buy good stocks cheap.” (The original name of the funds was to be Rawhide, after the TV program, believe it or not. He pledged me to secrecy, but pledges endure for only 10 years.)

Hakan Castegran of Harbor International, who is somewhat averse to interviews: “There is very little that I would want to do less than be interviewed by you.”

A photographer and I spent all day with Bruce Johnston when he managed Fidelity Equity-Income. “The photographer even followed me to bathroom!” he marveled later. At lunchtime we went out to hear a young, little-known analyst talk before an investment club: Abby Joseph Cohen. Johnston was impressed.

When the program manager at “Wall Street Week asked me whom he should invite onto the program, I suggested: Jean-Marie Eveillard, the fine value investor. When he appeared, he expressed doubts about the level of the stock market. But, remonstrated a panelist, you're 50% in stocks! How come? “I might be wrong,” said Jean-Marie calmly. A shock wave hit the panelists. He added: “I've been wrong before.” I thought the panelists would faint. Such words had never been uttered on the program before.

On a program about value investing, someone asked Jean-Marie: How much of a portfolio should be in growth stocks? His prompt answer: “Zeelch.” On index investing he once said: “Iss a lunacy.”

Value investors don't think much of indexing. A reporter extolled index funds at a Morningstar conference years ago (no, not me). An annoyed Marty Whitman was the next speaker. “I don't know who that guy was,” he said, “but he's a complete idiot.”

We went out to lunch with Ralph Wanger of the Acorn funds. My wife knows nothing about investing. To make conversation, she said to him, “Do you know how men are different from bonds?”

No, he said, surprised. “Bonds mature.” Wanger laughed and laughed.

Bill Gross, the bond maven, told me that when he was a teenager he spent time in Las Vegas gambling. He didn't make much. But he did learn something important: “You can beat the house.”