T. Rowe Price Capital Appreciation Fund

[Guest kathye]

Would anyone recommend this fund for a Roth IRA in comparison to another of this type? I understand it is a lower risk with a potential of high returns.

[John G]

You are not going to get a lot of answers at this location because there are not of "analysts" or "financial advisors" here... mostly tax specialists. But let me demo how I might evaluate this fund:

TRowe - reputable firm, been around a long time... OK

NO LOAD - good, no in or out commissions

FOCUS and HOLDINGS: Fund specializes in large cap stocks (big firms), preferred stocks (special classes of stocks that have first calls on dividends, but they don't have any of these right now), convertables (bonds that could convert to stock, but they don't have any of these right now), bonds, and money market cash .... Microsoft, Amerada Hess, General Mills, Loews lots of household names. But, I also noted that one of their top 10 holdsings is Marsh and McLennan, an insurance company riddled with scandal recently whose mgmt is being chased by Elliot Spitzer, Att General in NY. If they owned this before the scandal, they took a hit. If they bought it after the scandal broke, they are betting on an overreaction. A little spice to an otherwise bland list of large cap firms.

Nothing wrong with the value approach. They lean towards stocks that seem to be trading below the range suggested by other stocks in their group. For the last five years, value has been the great strategy. In the future, there will be times where an emphasis on growth stocks will provide stronger results. Value will still perform, but lag the interest and rise of growth stocks. Virtually no one can tell you in advance which approach will work better for any period of time.

Performance: this fund has been around for about 18 years and averaged around a 13% annual increase - better than OK, 13% is a good return.

History: 18 years, $4.2 billion in assets.... size will make this a little less nimble than newer funds but this is no where near the biggest in size - OK

Annual Expenses: 0.83% acceptable, I would be happier if this was lower, but this is a reasonable number for an actively managed fund.

Manager: Boesel - no info on him, he has been with TRowe for a three decades

Current holdings: Some surprises here. Zero preferred, zero regular bonds, 20% cash! 60% stock, 16% convertable bonds, 4% foreign. The average P/e is 14 which is below the general market. Earnings growth rate for the whole portfolio is 11% - middle range.

IRA Rules: $1000 to start, $50 additional - typical numbers

CONCLUSION: Perfectly acceptable approach for an initial Roth IRA account. Decent returns are likely, firm is established, strategy is biased slightly towards caution.

[david rigby]

Hmmm. Could this be a "stealth" advertisement?

[John G]

Ad? Not by me. Diagnositics suggest it is acceptable answer to "just getting started". Chance that this fund would be in the top 10% after 5 or 10 years.... probably no better than 10%.

Disclosure: I have no funds now at TRowe. I did 20 years ago when I lived on the east coast. I do have money at other mutual funds and you won't coax a name from me. Mostly I am a stock picker/trader.

[WDIK]

I think pax meant that perhaps kathye was doing more than looking for some feedback.

(This does not seem consistent with kathye's other posts.)

[Guest kathye]

I was only looking for feedback here. I'm new at this and thought this site had more finanical advisors. I appreciate John G. for his time spent on his reply and don't see anything wrong with giving and receving advice when needed.

[GBurns]

kathye

Nothing is wrong in seeking advice and you are consistent. I do not think that pax was referring to you in any way and hope that he clarifies.

Pay no attention to WDIK, after all ...What Does He Know?

[WDIK]

Pay no attention to WDIK, after all ...What Does He Know?

At least there is one thing that we can all agree on!

[John G]

Kathy, it is unfortunate that there are not more folks with investing experience that are willing to post on this site. When I first arrived here, there were none. I was looking for info on conversions in 1998.

It is also sad that there are not many message boards were you can get investment advice. Yahooland is filled with touts, ill-informed, flames, vulgar, and deliberate mis-informing.

As a stock picker, always looking for new ideas, I participate in a few niche message boards. One of these, www.valueforum.com , is a pay site ($100/year) that has about 800 members, but this site mostly deals with dividend paying stocks and various "value" stocks rather than any focus on mutual funds. They have over 100 posts each day and active debates about REITS, canroys, international stocks, oil&gas, tankers, etc.

Perhaps other readers can suggest a message board or place for Q&A for beginining investors where mutual funds might be covered?

[david rigby]

I'm not throwing bricks or accusations. No criticism of JohnG or others who choose to contribute financial analysis, and/or guide others in how to do that. Rather, these Message Boards are policed pretty well to keep out solicitation. If you re-read the orginal post, you can see how it might have been phrased to avoid that.