AAII Releases 'Model Portfolio' of Mutual Fund Holdings

January 23, 2004 (PLANSPONSOR.com) - Plan sponsors looking to add a little spark to their retirement plan components, may want to take a peak at the American Association of Individual Investors' (AAII) model mutual fund portfolio.

The Individual Investor’s Fund Portfolio, which AAII made public for all investors to use as a learning tool, is in response to requests for more specific guidance for individuals who are handling their own investments.   In that vein, AAII said in a news release that the selection of the model portfolio constituents follows an approach that an individual, rather than an institution, would follow when picking mutual fund investments.

The portfolio includes:

  • Ariel Fund
  • Meridian Growth Fund
  • T Rowe Price Cap App
  • Royce Premier/Inv
  • Thompson Plumb
  • Fenimore Value Fund
  • FMI Common Stock
  • Mosaic Equity Mid-Cap
  • Royce PA Mutual/Inv
  • Babson Shadow Stock.

However, AAII emphasizes that holding all 10 funds is not necessary.   “Due to the diversification inherent in each of our selected funds, it is not necessary to hold all 10 funds. If you want to pursue a portfolio of fewer funds, you can apply your own criteria to reduce the list. For instance, you may consider eliminating the largest funds by asset size or those with higher expense ratios–the choice is yours,” John Markese, president of AAII, said in the release.

To arrive at this list, AAII set a list of nine criterions that each fund had to meet:

  • a pure no-load fund
  • have been in existence for at least 10 years
  • higher returns than the S&P 500 index on both an absolute and risk-adjusted basis for the most recent five-year and 10-year periods
  • cannot have been down for two calendar years in a row
  • never have had a three-year period with negative returns
  • primarily a domestic common stock fund
  • net assets of less than $2.5 billion
  • expense ratio of less than 1.25%
  • must currently be open to individuals.

More information, including return and risk data for the 10 funds is available at  www.aaii.com/funds .